Benzinga | Aug 17, 2021 10:56AM 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.

Why ROCE Is Significant

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.

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.

For American Water Works Co, the return on capital employed ratio shows the number of assets can actually help the company achieve higher returns, an important note investors will take into account when gauging the payoff from long-term financing strategies.

Upcoming Earnings Estimate

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