Benzinga | Feb 25, 2021 09:19AM EST

Return On Capital Employed Overview: Domino's Pizza

Looking at Q4, Domino's Pizza (NYSE:DPZ) earned $244.04 million, a 50.48% increase from the preceding quarter. Domino's Pizza also posted a total of $1.36 billion in sales, a 40.23% increase since Q3. In Q3, Domino's Pizza earned $162.18 million, whereas sales reached $967.72 million.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in Domino's Pizza'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, Domino's Pizza posted an ROCE of -0.07%.

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 Domino's Pizza'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.

Q4 Earnings Insight

Domino's Pizza reported Q4 earnings per share at $3.46/share, which did not meet analyst predictions of $3.89/share.