Benzinga | Jun 16, 2021 09:51AM EDT

Dell Technologies Insights: Return On Capital Employed

Looking at Q1, Dell Technologies (NYSE:DELL) earned $1.38 billion, a 36.84% increase from the preceding quarter. Dell Technologies's sales decreased to $24.50 billion, a 6.31% change since Q4. In Q4, Dell Technologies earned $2.18 billion, and total sales reached $26.15 billion.

What Is Return On Capital Employed?

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 Q1, Dell Technologies posted an ROCE of 0.15%.

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.

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

Q1 Earnings Insight

Dell Technologies reported Q1 earnings per share at $2.13/share, which beat analyst predictions of $1.61/share.