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Looking Into CVS Health's Return On Capital Employed

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Benzinga Insights
·1 min read
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CVS Health (NYSE:CVS) showed a loss in earnings since Q3, totaling $2.28 billion. Sales, on the other hand, increased by 3.73% to $69.55 billion during Q4. CVS Health reached earnings of $3.04 billion and sales of $67.06 billion in Q3.

What Is Return On Capital Employed?

Return on Capital Employed is a measure of yearly pre-tax profit relative to capital employed by a business. Changes in earnings and sales indicate shifts in a company's ROCE. A higher ROCE 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 ROCE suggests the opposite. In Q4, CVS Health posted an ROCE of 0.03%.

Keep in mind, while ROCE 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.

View more earnings on CVS

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows CVS Health 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 CVS Health's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q4 Earnings Recap

CVS Health reported Q4 earnings per share at $1.3/share, which beat analyst predictions of $1.24/share.

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