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Return On Capital Employed Overview: Trex Co

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Benzinga Insights
·2 min read
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Looking at Q4, Trex Co (NYSE:TREX) earned $58.17 million, a 2.16% increase from the preceding quarter. Trex Co's sales decreased to $228.29 million, a 1.39% change since Q3. In Q3, Trex Co earned $56.94 million, whereas sales reached $231.50 million.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in Trex Co'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 Q4, Trex Co posted an ROCE of 0.1%.

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.

View more earnings on TREX

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Trex Co 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.

For Trex Co, 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.

Q4 Earnings Recap

Trex Co reported Q4 earnings per share at $0.37/share, which beat analyst predictions of $0.36/share.

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