Cherry Hill Mortgage: Return On Capital Employed Insights

Cherry Hill Mortgage CHMI posted Q1 earnings of $7.05 million, an increase from Q4 of 16.53%. Sales dropped to $5.87 million, a 26.76% decrease between quarters. In Q4, Cherry Hill Mortgage brought in $8.02 million in sales but only earned $6.05 million.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in Cherry Hill Mortgage'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, Cherry Hill Mortgage posted an ROCE of 0.02%.

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

Q1 Earnings Insight

Cherry Hill Mortgage reported Q1 earnings per share at $0.21/share, which did not meet analyst predictions of $0.32/share.