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Walt disney (NYSE: DIS) posted a 117.26% drop in profits from the fourth quarter. However, sales rose 10.48% from the previous quarter to $ 16.25 billion. Despite the increase in sales this quarter, the decline in profits may suggest that Walt Disney is not using its capital as efficiently as possible. In the fourth quarter, Walt Disney had sales of $ 14.71 billion, but lost $ 846.00 million in profits.
What is the return on capital employed?
Return on capital employed is a measure of the annual profit before taxes relative to the capital employed by a business. Changes in revenue and sales indicate changes in a company’s ROCE. A higher ROCE is usually indicative of successful business growth and is a sign of higher earnings per share in the future. A low or negative ROCE suggests the opposite. In the first quarter, Walt Disney posted a ROCE of 0.0%.
See also: How to buy Disney shares
Keep in mind that while ROCE is a good measure of a company’s recent performance, it is not a very reliable predictor of a company’s profits or sales in the near future.
ROCE is an important measure for comparing similar businesses. A relatively high ROCE shows that Walt Disney potentially operates 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.
For Walt Disney, the return on capital employed ratio shows that the number of assets can actually help the company achieve higher returns, an important note that investors will take into account when evaluating the benefits of investment strategies. long-term funding.
Summary of first quarter results
Walt Disney reported first-quarter earnings per share of $ 0.32 / share, which beat analysts’ expectations of – $ 0.41 / share.
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