Gap Insights: Return On Capital Employed

Looking at Q1, Gap GPS earned $240.00 million, a 79.1% increase from the preceding quarter. Gap's sales decreased to $3.99 billion, a 9.79% change since Q4. In Q4, Gap brought in $4.42 billion in sales but only earned $134.00 million.

What Is ROCE?

Changes in earnings and sales indicate shifts in Gap'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 Q1, Gap posted an ROCE of 0.09%.

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

Q1 Earnings Insight

Gap reported Q1 earnings per share at $0.48/share, which beat analyst predictions of $-0.05/share.