Market Overview

Looking Into Clorox's Return On Capital Employed

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Looking at Q4, Clorox (NYSE: CLX) earned $297.00 million, a 26.38% increase from the preceding quarter. Clorox also posted a total of $1.98 billion in sales, an 11.22% increase since Q3. In Q3, Clorox earned $235.00 million and total sales reached $1.78 billion.

Why ROCE Is Significant

Return on Capital Employed is a measure of yearly pre-tax profit relative to capital employed in a business. Changes in earnings and sales indicate shifts in a company's ROCE. A higher ROCE is generally representative of successful growth in a company and is a sign of higher earnings per share for shareholders in the future. A low or negative ROCE suggests the opposite. In Q4, Clorox posted an ROCE of 0.08%.

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.

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Clorox 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. In Clorox's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q4 Earnings

Clorox reported Q4 earnings per share at $2.41/share against analyst predictions of $1.98/share.

 

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