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Looking at Q2, Tesla (NASDAQ:TSLA) earned $327.00 million, a 15.55% increase from the preceding quarter. Tesla also posted a total of $6.04 billion in sales, a 0.85% increase since Q1. Tesla earned $283.00 million, and sales totaled $5.99 billion in Q1.
Why ROCE Is Significant
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Changes in earnings and sales indicate shifts in Tesla’s Return on Capital Employed, a measure of yearly pre-tax profit relative to capital employed in a business. Generally, a higher ROCE suggests successful growth in a company and is a sign of higher earnings per share for shareholders in the future. In Q2, Tesla posted an ROCE of 0.03%.
It is important to keep in mind ROCE evaluates past performance and is not used as a predictive tool. It is a good measure of a company's recent performance, but several factors could affect earnings and sales in the near future.
Return on Capital Employed is an important measurement of efficiency and a useful tool when comparing companies that operate in the same industry. A relatively high ROCE indicates a company may be generating profits that can be reinvested into more capital, leading to higher returns and growing EPS for shareholders.
For Tesla, the return on capital employed ratio shows the number of assets can actually help the company achieve higher returns, an important note investors will take into account when gauging the payoff from long-term financing strategies.
Q2 Earnings Insight
Tesla reported Q2 earnings per share at $2.18/share, which beat analyst predictions of $-0.11/share.
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