Benzinga | Jul 9, 2021 11:08AM EDT

Chico's FAS: Return On Capital Employed Insights

Chico's FAS: Return On Capital Employed Insights

During Q1, Chico's FAS (NYSE:CHS) brought in sales totaling $387.96 million. However, earnings decreased 88.25%, resulting in a loss of $7.52 million. Chico's FAS collected $386.20 million in revenue during Q4, but reported earnings showed a $64.03 million loss.

What Is ROCE?

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, Chico's FAS posted an ROCE of -0.05%.

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.

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Chico's FAS 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.

For Chico's FAS, the return on capital employed ratio shows the current amount of assets may not actually be helping the company achieve higher returns, a note many investors will take into account when making long-term financial decisions.

Q1 Earnings Insight

Chico's FAS reported Q1 earnings per share at $-0.08/share, which beat analyst predictions of $-0.17/share.