Return on Capital Employed Overview: Magnolia Oil & Gas

After pulling data from Benzinga Pro it seems like during Q2, Magnolia Oil & Gas (NYSE:MGY) earned $129.19 million, a 29.33% increase from the preceding quarter. Magnolia Oil & Gas also posted a total of $250.73 million in sales, a 20.74% increase since Q1. In Q1, Magnolia Oil & Gas earned $99.90 million, and total sales reached $207.66 million.

What Is ROCE?

Return on Capital Employed is a measure of yearly pre-tax profit relative to capital employed by a business. Changes in earnings and sales indicate shifts in a company's ROCE. A higher ROCE is generally representative of successful growth of a company and is a sign of higher earnings per share in the future. A low or negative ROCE suggests the opposite. In Q2, Magnolia Oil & Gas posted an ROCE of 0.15%.

Keep in mind, while ROCE is a good measure of a company's recent performance, it is not a highly reliable predictor of a company's earnings or 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.

In Magnolia Oil & Gas's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Analyst Predictions

Magnolia Oil & Gas reported Q2 earnings per share at $0.56/share, which beat analyst predictions of $0.36/share.