Benzinga | Aug 3, 2020 11:48AM EDT

Looking Into Marathon Petroleum's Return On Capital Employed

Marathon Petroleum (NYSE:MPC) reported Q2 sales of $15.20 billion. Earnings fell to a loss of $12.15 billion. In Q1, total sales reached $24.08 billion.

What Is ROCE?

Changes in earnings and sales indicate shifts in Marathon Petroleum's Return on Capital Employed, a measure of yearly pre-tax profit relative to capital employed in a business. Generally, a higher ROCE suggests successful growth in a company and is a sign of higher earnings per share for shareholders in the future. In Q2, Marathon Petroleum 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.

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. In Marathon Petroleum's case, the ROCE ratio shows the amount of assets may not be helping the company achieve higher returns. Investors may take this into account before making any long-term financial decisions.

Upcoming Earnings Estimate

Marathon Petroleum reported Q2 earnings per share at $-1.33/share against analyst predictions of $-1.75/share.