Intel (NASDAQ: INTC) posted Q2 earnings of $5.70 billion, an increase from Q1 of 19.05%. Sales dropped to $19.73 billion, a 0.5% decrease between quarters. In Q1, Intel earned $7.04 billion, and total sales reached $19.83 billion.
Why ROCE Is Significant
Changes in earnings and sales indicate shifts in Intel’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 Q2, Intel posted an ROCE of 0.07%.
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.
ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Intel 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 lead to higher returns and earnings per share growth.
In Intel's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.
Q2 Earnings Insight
Intel reported Q2 earnings per share at $1.23/share, which beat analyst predictions of $1.1/share.
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August 31, 2020 at 07:49PM
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