Looking Into New Residential Inv's Return On Capital Employed

During Q2, New Residential Inv NRZ brought in sales totaling $115.80 million. However, earnings decreased 19.8%, resulting in a loss of $323.56 million. New Residential Inv collected $185.52 million in revenue during Q1, but reported earnings showed a $403.41 million loss.

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 Q2, New Residential Inv posted an ROCE of -0.06%.

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.

For New Residential Inv, the return on capital employed ratio shows the current amount of assets may not actually be helping the company achieve higher returns, a note many investors will take into account when making long-term financial decisions.

Q2 Earnings Insight

New Residential Inv reported Q2 earnings per share at $0.34/share, which beat analyst predictions of $0.31/share.