Benzinga | Apr 12, 2021 10:58AM EDT

ROCE Insights For AGCO

AGCO (NYSE:AGCO) showed a loss in earnings since Q3, totaling $178.00 million. Sales, on the other hand, increased by 8.77% to $2.72 billion during Q4. AGCO reached earnings of $224.00 million and sales of $2.50 billion in Q3.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in AGCO'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, AGCO 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 AGCO 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 AGCO's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q4 Earnings Insight

AGCO reported Q4 earnings per share at $1.54/share, which beat analyst predictions of $1.11/share.