Benzinga | Jul 17, 2020 08:01AM EDT

Return On Capital Employed Overview: Hertz Global Holdings

Hertz Global Holdings (NYSE:HTZ) reported Q1 sales of $1.92 billion. Last year, the company reported Q4 sales of $2.33 billion but lost a total of $357.00 million in terms of earnings, resulting in a 112.31% decrease from Q3. Hertz Global Holdings reached earnings of $2.90 billion and sales of $2.84 billion in Q3 of last year.

What Is ROCE?

Changes in earnings and sales indicate shifts in Hertz Global Holdings's Return on Capital Employed, a measure of yearly pre-tax profit relative to capital employed in a business. Generally, a higher ROCE suggests successful growth in a company and is a sign of higher earnings per share for shareholders in the future.

In Q4, Hertz Global Holdings posted an ROCE of -0.03%.

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 Hertz Global Holdings, the return on capital employed ratio shows the current amount of assets may not actually be helping the company achieve higher returns, a note many investors will take into account when making long-term financial decisions.

Q1 Earnings

Hertz reported Q1 earnings per share of $-1.78/share.