Campbell Soup's Return On Capital Employed Insights - Campbell Soup (NYSE:CPB)
Benzinga Pulled from Benzinga Pro data, Campbell Soup CPB posted Q3 earnings of $160.00 million, an increase from Q2 of 31.03%. Sales dropped to $2.23 billion, a 10.3% decrease between quarters. Campbell Soup earned $232.00 million, and sales totaled $2.48 billion in Q2.
What Is Return On Capital Employed?
Earnings data without context is not clear and can be difficult to base trading decisions on. Return on Capital Employed (ROCE) helps to filter signal from noise by measuring 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, Campbell Soup posted an ROCE of 0.04%.
It is important to keep in mind that ROCE 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.
ROCE is a powerful metric for comparing the effectiveness of capital allocation for similar companies. A relatively high ROCE shows Campbell Soup 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, ultimately, earnings per share (EPS) growth.
