Looking Into Cisco Systems's Return On Capital Employed
Looking at Q1, Cisco Systems (NASDAQ: CSCO) earned $2.57 billion, a 20.85% increase from the preceding quarter. Cisco Systems's sales decreased to $11.93 billion, a 1.85% change since Q4. Cisco Systems earned $3.25 billion, and sales totaled $12.15 billion in Q4.
What Is ROCE?
Changes in earnings and sales indicate shifts in Cisco Systems’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 Q1, Cisco Systems 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.
Return on Capital Employed is an important measurement of efficiency and a useful tool when comparing companies that operate in the same industry. A relatively high ROCE indicates a company may be generating profits that can be reinvested into more capital, leading to higher returns and growing EPS for shareholders.
For Cisco Systems, 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.
Q1 Earnings Recap
Cisco Systems reported Q1 earnings per share at $0.76/share, which beat analyst predictions of $0.7/share.
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