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Looking Into DXC Technology's Return On Capital Employed

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DXC Technology (NYSE: DXC) reported Q1 sales of $4.50 billion. Earnings fell to a loss of $142.00 million, resulting in a 95.95% decrease from last quarter. In Q4, DXC Technology brought in $4.82 billion in sales but lost $3.50 billion in earnings.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in DXC Technology’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 Q1, DXC Technology 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.

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows DXC Technology 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 DXC Technology's case, the ROCE ratio shows the amount of assets may not be helping the company achieve higher returns. Investors may take this into account before making any long-term financial decisions.

Q1 Earnings Recap

DXC Technology reported Q1 earnings per share at $0.21/share, which beat analyst predictions of $0.12/share.

 

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Posted-In: Earnings News Tech