Benzinga | Jun 16, 2021 10:04AM EDT

Return On Capital Employed Overview: Hanesbrands

Hanesbrands (NYSE:HBI) posted Q1 earnings of $190.12 million, an increase from Q4 of 142.85%. Sales dropped to $1.50 billion, a 16.71% decrease between quarters. In Q4, Hanesbrands brought in $1.80 billion in sales but lost $443.74 million in earnings.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in Hanesbrands'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, Hanesbrands posted an ROCE of 0.39%.

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

Q1 Earnings Insight

Hanesbrands reported Q1 earnings per share at $0.39/share, which beat analyst predictions of $0.26/share.