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Looking into Capital Senior Living's Return on Capital Employed

Author: Benzinga Insights | August 20, 2021 01:36pm

After pulling data from Benzinga Pro it seems like during Q2, Capital Senior Living (NYSE:CSU) brought in sales totaling $57.54 million. However, earnings decreased 21.85%, resulting in a loss of $8.54 million. Capital Senior Living collected $61.65 million in revenue during Q1, but reported earnings showed a $7.01 million loss.

What Is Return On Capital Employed?

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, Capital Senior Living posted an ROCE of 0.04%.

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.

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Capital Senior Living 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 Capital Senior Living's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Upcoming Earnings Estimate

Capital Senior Living reported Q2 earnings per share at $23.49/share, which beat analyst predictions of $-5.14/share.

Posted In: CSU

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