Looking into Otter Tail's Return on Capital Employed

After pulling data from Benzinga Pro it seems like during Q2, Otter Tail OTTR earned $59.20 million, a 33.94% increase from the preceding quarter. Otter Tail also posted a total of $285.61 million in sales, a 9.14% increase since Q1. In Q1, Otter Tail earned $44.20 million, and total sales reached $261.70 million.

What Is ROCE?

Changes in earnings and sales indicate shifts in Otter Tail'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 Q2, Otter Tail posted an ROCE of 0.06%.

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

Upcoming Earnings Estimate

Otter Tail reported Q2 earnings per share at $1.01/share, which beat analyst predictions of $0.54/share.