Market Overview

Looking Into Ford Motor's Return On Capital Employed

Share:

Ford Motor (NYSE:F) showed a loss in earnings since Q2, totaling $2.35 billion. Sales, on the other hand, increased by 108.8% to $34.71 billion during Q3. Ford Motor collected $16.62 billion in revenue during Q2, but reported earnings showed a $2.76 billion loss.

See Also: How To Buy Ford Stock

What Is Return On Capital Employed?

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.

For Ford Motor, the return on capital employed ratio shows the number of assets can actually help the company achieve higher returns, an important note investors will take into account when gauging the payoff from long-term financing strategies.

Q3 Earnings Recap

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

 

Related Articles (F)

View Comments and Join the Discussion!

Posted-In: BZI-ROCEEarnings News