Benzinga | Feb 10, 2021 11:11AM EST

Looking Into Agilent Technologies's Return On Capital Employed

Looking at Q4, Agilent Technologies (NYSE:A) earned $299.00 million, a 30.0% increase from the preceding quarter. Agilent Technologies also posted a total of $1.48 billion in sales, a 17.61% increase since Q3. Agilent Technologies earned $230.00 million, and sales totaled $1.26 billion in Q3.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in Agilent Technologies'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, Agilent Technologies posted an ROCE of 0.06%.

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.

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

Q4 Earnings Recap

Agilent Technologies reported Q4 earnings per share at $0.98/share, which beat analyst predictions of $0.93/share.