CVS Health Earnings Perspective: Return On Invested Capital

According to Benzinga Pro data CVS Health CVS posted a 18.34% decrease in earnings from Q3. Sales, however, increased by 3.81% over the previous quarter to $76.60 billion. Despite the increase in sales this quarter, the decrease in earnings may suggest CVS Health is not utilizing their capital as effectively as possible. CVS Health reached earnings of $1.59 billion and sales of $73.79 billion in Q3.

What Is Return On Invested Capital?

Return on Invested Capital is a measure of yearly pre-tax profit relative to capital invested by a business. Changes in earnings and sales indicate shifts in a company's ROIC. A higher ROIC 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 ROIC suggests the opposite. In Q4, CVS Health posted an ROIC of 2.63%.

Keep in mind, while ROIC 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 Invested Capital is a measure of yearly pre-tax profit relative to capital invested by a business. Changes in earnings and sales indicate shifts in a company's ROIC. A higher ROIC 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 ROIC suggests the opposite. In Q4, CVS Health posted an ROIC of 2.63%.

Keep in mind, while ROIC 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.

For CVS Health, the positive return on invested capital ratio of 2.63% suggests that management is allocating their capital effectively. Effective capital allocation is a positive indicator that a company will achieve more durable success and favorable long-term returns.

Analyst Predictions

CVS Health reported Q4 earnings per share at $1.98/share, which beat analyst predictions of $1.83/share.

This article was generated by Benzinga's automated content engine and reviewed by an editor.