Looking Into CVS Health's Return On Invested Capital

According to Benzinga Pro, during Q2, CVS Health CVS earned $2.96 billion, a 28.02% increase from the preceding quarter. CVS Health also posted a total of $80.64 billion in sales, a 4.96% increase since Q1. CVS Health earned $2.31 billion, and sales totaled $76.83 billion in Q1.

Why Is ROIC Significant?

Earnings data without context is not clear and can difficult to base trading decisions on. Return on Invested Capital (ROIC) helps to filter signal from noise by measuring yearly pre-tax profit relative to invested capital by a business. Generally, a higher ROIC suggests successful growth of a company and is a sign of higher earnings per share in the future. In Q2, CVS Health posted an ROIC of 2.68%.

It is important to keep in mind that ROIC evaluates past performance and is not used as a predictive tool. It is a good measure of a company's recent performance, but does not account for factors that could affect earnings and sales in the near future.

For CVS Health, the positive return on invested capital ratio of 2.68% 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 Q2 earnings per share at $2.4/share, which beat analyst predictions of $2.17/share.

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

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