Market Overview

Looking Into American International Gr's Return On Capital Employed

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During Q2, American International Gr (NYSE: AIG) brought in sales totaling $9.40 billion. However, earnings decreased 419.12%, resulting in a loss of $9.30 billion. American International Gr reached earnings of $2.91 billion and sales of $14.44 billion in Q1.

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, American International Gr posted an ROCE of -0.15%.

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 American International Gr, 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 Recap

American International Gr reported Q2 earnings per share at $0.66/share, which beat analyst predictions of $0.5/share.

 

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Posted-In: Earnings News