Benzinga | Jun 8, 2021 11:37AM EDT

Return On Capital Employed Overview: Cherry Hill Mortgage

Looking at Q1, Cherry Hill Mortgage (NYSE:CHMI) earned $7.05 million, a 16.53% increase from the preceding quarter. Cherry Hill Mortgage's sales decreased to $5.87 million, a 26.76% change since Q4. In Q4, Cherry Hill Mortgage brought in $8.02 million in sales but only earned $6.05 million.

What Is ROCE?

Changes in earnings and sales indicate shifts in Cherry Hill Mortgage'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, Cherry Hill Mortgage posted an ROCE of 0.02%.

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

Q1 Earnings Insight

Cherry Hill Mortgage reported Q1 earnings per share at $0.21/share, which did not meet analyst predictions of $0.32/share.