Benzinga | Aug 27, 2021 05:14PM EDT

Return on Capital Employed Overview: Heritage Insurance Hldgs

After pulling data from Benzinga Pro it seems like during Q2, Heritage Insurance Hldgs's (NYSE:HRTG) reported sales totaled $146.50 million. Despite a 31.58% in earnings, the company posted a loss of $3.99 million. In Q1, Heritage Insurance Hldgs brought in $142.20 million in sales but lost $5.83 million in earnings.

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 Q2, Heritage Insurance Hldgs posted an ROCE of -0.01%.

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.

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.

In Heritage Insurance Hldgs's case, the ROCE ratio shows the amount of assets may not be helping the company achieve higher returns. Investors may take this into account before making any long-term financial decisions.

Analyst Predictions

Heritage Insurance Hldgs reported Q2 earnings per share at $-0.14/share, which did not meet analyst predictions of $0.28/share.