Market Overview

Looking Into General Electric's Return On Capital Employed


During Q2, General Electric (NYSE: GE) brought in sales totaling $17.75 billion. However, earnings decreased 375.68%, resulting in a loss of $2.86 billion. In Q1, General Electric earned $1.04 billion, and total sales reached $20.52 billion.

What Is Return On Capital Employed?

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, General Electric 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.

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 General Electric'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.

Q2 Earnings Insight

General Electric reported Q2 earnings per share at $-0.15/share, which did not meet analyst predictions of $-0.1/share.


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Posted-In: Earnings News