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Return On Capital Employed Overview: Devon Energy

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Devon Energy (NYSE: DVN) reported Q2 sales of $394.00 million. Earnings fell to a loss of $237.00 million, resulting in a 88.66% decrease from last quarter. Devon Energy collected $2.09 billion in revenue during Q1, but reported earnings showed a $2.09 billion loss.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in Devon Energy’s Return on Capital Employed, a measure of yearly pre-tax profit relative to capital employed by a business. Generally, a higher ROCE suggests successful growth of a company and is a sign of higher earnings per share in the future. In Q2, Devon Energy posted an ROCE of -0.07%.

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 Devon Energy 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 generally lead to higher returns and earnings per share growth.

In Devon Energy'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 Recap

Devon Energy reported Q2 earnings per share at $-0.18/share, which beat analyst predictions of $-0.26/share.

 

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Posted-In: Earnings News