Benzinga | Jul 9, 2021 11:17AM EDT

Oxford Industries Insights: Return On Capital Employed

Oxford Industries (NYSE:OXM) posted a 309.88% decrease in earnings from Q4. Sales, however, increased by 20.05% over the previous quarter to $265.76 million. Despite the increase in sales this quarter, the decrease in earnings may suggest Oxford Industries is not utilizing their capital as effectively as possible. In Q4, Oxford Industries brought in $221.37 million in sales but lost $16.62 million in earnings.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in Oxford Industries'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, Oxford Industries posted an ROCE of 0.08%.

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

Q1 Earnings Insight

Oxford Industries reported Q1 earnings per share at $1.89/share, which beat analyst predictions of $1.05/share.