Big Lots Insights: Return On Capital Employed

Big Lots BIG posted Q1 earnings of $122.55 million, an increase from Q4 of 6.43%. Sales dropped to $1.63 billion, a 6.44% decrease between quarters. Big Lots earned $130.97 million, and sales totaled $1.74 billion in Q4.

What Is ROCE?

Changes in earnings and sales indicate shifts in Big Lots'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, Big Lots posted an ROCE of 0.1%.

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 Big Lots 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.

For Big Lots, the return on capital employed ratio shows the number of assets can actually help the company achieve higher returns, an important note investors will take into account when gauging the payoff from long-term financing strategies.

Q1 Earnings Recap

Big Lots reported Q1 earnings per share at $2.62/share, which beat analyst predictions of $1.69/share.