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Return On Capital Employed Overview: UnitedHealth Group

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UnitedHealth Group (NYSE: UNH) posted Q2 earnings of $8.90 billion, an increase from Q1 of 92.18%. Sales dropped to $62.14 billion, a 3.54% decrease between quarters. In Q1, UnitedHealth Group brought in $64.42 billion in sales but only earned $4.63 billion.

What Is ROCE?

Changes in earnings and sales indicate shifts in UnitedHealth Group’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, UnitedHealth Group posted an ROCE of 0.13%.

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.

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 UnitedHealth Group, 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 Recap

UnitedHealth Group reported Q2 earnings per share at $7.12/share, which beat analyst predictions of $5.18/share.

 

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Posted-In: Earnings News Health Care General