Benzinga | Jun 16, 2021 10:15AM EDT

Return On Capital Employed Overview: Perrigo Co

Perrigo Co (NYSE:PRGO) posted Q1 earnings of $51.40 million, an increase from Q4 of 198.47%. Sales dropped to $1.01 billion, a 21.71% decrease between quarters. Perrigo Co collected $1.29 billion in revenue during Q4, but reported earnings showed a $52.20 million loss.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in Perrigo Co'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, Perrigo Co posted an ROCE of 0.01%.

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

Q1 Earnings Insight

Perrigo Co reported Q1 earnings per share at $0.5/share, which did not meet analyst predictions of $0.57/share.