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ROCE Insights For Ford Motor

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Ford Motor (NYSE: F) posted a 185.21% decrease in earnings from Q2. Sales, however, increased by 108.8% over the previous quarter to $34.71 billion. Despite the increase in sales this quarter, the decrease in earnings may suggest Ford Motor is not utilizing their capital as effectively as possible. Ford Motor collected $16.62 billion in revenue during Q2, but reported earnings showed a $2.76 billion loss.

What Is ROCE?

Changes in earnings and sales indicate shifts in Ford Motor’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 Q3, Ford Motor 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 Ford Motor 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 Ford Motor's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q3 Earnings Insight

Ford Motor reported Q3 earnings per share at $0.65/share, which beat analyst predictions of $0.16/share.

 

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Posted-In: Earnings News