Looking Into Intuitive Surgical's Return On Capital Employed
Intuitive Surgical (NASDAQ: ISRG) saw a drop in both earnings and sales in Q2. Earnings dropped to $316.20 million, a 80.22% decrease from the previous quarter. Sales fell to $852.10 million, down 22.54% from the previous quarter. Intuitive Surgical earned $1.60 billion and saw $1.10 billion in sales in Q1.
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, Intuitive Surgical 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 Intuitive Surgical, 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
Intuitive Surgical reported Q2 earnings per share at $1.11/share against analyst predictions of $0.74/share.
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