Market Overview

Return On Capital Employed Overview: Xerox

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During Q2, Xerox (NYSE: XRX) brought in sales totaling $1.47 billion. However, earnings decreased 100.16%, resulting in a loss of $2.00 million. Xerox reached earnings of $1.24 billion and sales of $1.86 billion in Q1.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in Xerox’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, Xerox posted an ROCE of 0.3%.

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.

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Xerox is potentially operating at a higher level of efficiency than other companies in its industry. If the company is generating high profits with its current level of capital, some of that money can be reinvested in more capital which will lead to higher returns and earnings per share growth. For Xerox, 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

Xerox reported Q2 earnings per share at $0.15/share against analyst predictions of $-0.03/share.

 

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