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Return On Capital Employed Overview: Eli Lilly

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Looking at Q3, Eli Lilly (NYSE: LLY) earned $1.28 billion, a 6.81% increase from the preceding quarter. Eli Lilly also posted a total of $5.74 billion in sales, a 4.4% increase since Q2. In Q2, Eli Lilly earned $1.20 billion, and total sales reached $5.50 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 Q3, Eli Lilly posted an ROCE of 0.26%.

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 Eli Lilly 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 Eli Lilly's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q3 Earnings Recap

Eli Lilly reported Q3 earnings per share at $1.54/share, which did not meet analyst predictions of $1.71/share.

 

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Posted-In: Earnings News