Benzinga | May 6, 2021 11:17AM EDT

Looking Into CenterPoint Energy's Return On Capital Employed

Looking Into CenterPoint Energy's Return On Capital Employed

Looking at Q1, CenterPoint Energy (NYSE:CNP) earned $453.00 million, a 58.95% increase from the preceding quarter. CenterPoint Energy also posted a total of $2.55 billion in sales, a 24.0% increase since Q4. CenterPoint Energy earned $285.00 million, and sales totaled $2.05 billion in Q4.

What Is ROCE?

Changes in earnings and sales indicate shifts in CenterPoint Energy'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 Q1, CenterPoint Energy posted an ROCE of 0.05%.

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 CenterPoint Energy 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 CenterPoint Energy's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q1 Earnings Insight

CenterPoint Energy reported Q1 earnings per share at $0.59/share, which beat analyst predictions of $0.53/share.