Benzinga | Mar 25, 2021 07:31AM EDT

Return On Capital Employed Overview: Winnebago Industries





Looking at Q2, Winnebago Industries (NYSE:WGO) earned $99.97 million, a 17.6% increase from the preceding quarter. Winnebago Industries also posted a total of $839.89 million in sales, a 5.89% increase since Q1. In Q1, Winnebago Industries earned $85.02 million, and total sales reached $793.13 million.

Why ROCE Is Significant

Return on Capital Employed is a measure of yearly pre-tax profit relative to capital employed by a business. Changes in earnings and sales indicate shifts in a company's ROCE. A higher ROCE is generally representative of successful growth of a company and is a sign of higher earnings per share in the future. A low or negative ROCE suggests the opposite. In Q2, Winnebago Industries posted an ROCE of 0.11%.

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.

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

Q2 Earnings Recap

Winnebago Industries reported Q2 earnings per share at $2.12/share, which beat analyst predictions of $1.41/share.