Benzinga | Aug 20, 2021 01:40PM EDT

Return on Capital Employed Overview: Global Industrial

After pulling data from Benzinga Pro it seems like during Q2, Global Industrial (NYSE:GIC) earned $24.70 million, a 274.24% increase from the preceding quarter. Global Industrial also posted a total of $272.60 million in sales, a 8.56% increase since Q1. In Q1, Global Industrial earned $6.60 million, and total sales reached $251.10 million.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in Global Industrial'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, Global Industrial posted an ROCE of 0.18%.

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

Analyst Predictions

Global Industrial reported Q2 earnings per share at $0.55/share, which beat analyst predictions of $0.38/share.