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Looking Into JPMorgan Chase's Return On Capital Employed

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Looking at Q2, JPMorgan Chase (NYSE: JPM) earned $5.57 billion, a 78.59% increase from the preceding quarter. JPMorgan Chase also posted a total of $33.82 billion in sales, a 16.33% increase since Q1. In Q1, JPMorgan Chase earned $3.12 billion, and total sales reached $29.07 billion.

What Is Return On Capital Employed?

Return on Capital Employed is a measure of yearly pre-tax profit relative to capital employed by a business. Changes in earnings and sales indicate shifts in a company's ROCE. A higher ROCE is generally representative of successful growth of a company and is a sign of higher earnings per share in the future. A low or negative ROCE suggests the opposite. In Q2, JPMorgan Chase posted an ROCE of 0.02%.

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.

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows JPMorgan Chase 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 JPMorgan Chase's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q2 Earnings Recap

JPMorgan Chase reported Q2 earnings per share at $1.38/share, which beat analyst predictions of $1.04/share.

 

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Posted-In: Earnings News Financing