Benzinga | Aug 10, 2021 10:52AM EDT

Return on Capital Employed Overview: American Water Works Co

After pulling data from Benzinga Pro it seems like during Q2, American Water Works Co (NYSE:AWK) earned $330.00 million, a 44.1% increase from the preceding quarter. American Water Works Co also posted a total of $999.00 million in sales, a 12.5% increase since Q1. American Water Works Co earned $229.00 million, and sales totaled $888.00 million in Q1.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in American Water Works 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 Q2, American Water Works Co posted an ROCE of 0.04%.

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

Upcoming Earnings Estimate

American Water Works Co reported Q2 earnings per share at $1.14/share, which beat analyst predictions of $1.09/share.