Benzinga | Oct 26, 2020 10:02AM EDT

Looking Into Energy Transfer's Return On Capital Employed

Looking at Q2, Energy Transfer (NYSE:ET) earned $1.34 billion, a 2090.16% increase from the preceding quarter. Energy Transfer's sales decreased to $7.34 billion, a 36.89% change since Q1. Energy Transfer earned $61.00 million, and sales totaled $11.63 billion in Q1.

What Is ROCE?

Changes in earnings and sales indicate shifts in Energy Transfer'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, Energy Transfer 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.

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

Q2 Earnings Insight

Energy Transfer reported Q2 earnings per share at $0.13/share, which did not meet analyst predictions of $0.28/share.