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In Q2, Enservco (AMEX: ENSV) posted sales of $2.14 million. Earnings were up 73.67%, but Enservco still reported an overall loss of $3.88 million. Enservco collected $9.39 million in revenue during Q1, but reported earnings showed a $2.24 million loss.
Why ROCE Is Significant
Return on Capital Employed is a measure of yearly pre-tax profit relative to capital employed in a business. Changes in earnings and sales indicate shifts in a company's ROCE. A higher ROCE is generally representative of successful growth in a company and is a sign of higher earnings per share for shareholders in the future. A low or negative ROCE suggests the opposite. In Q2, Enservco posted an ROCE of 0.41%.
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.
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 Enservco, 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.
Q2 Earnings Insight
Enservco reported Q2 earnings per share at $-0.08/share, which did not meet analyst predictions of $-0.05/share.
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