Argan Insights: Return On Capital Employed

Looking at Q1, Argan AGX earned $13.82 million, a 16.44% increase from the preceding quarter. Argan also posted a total of $126.34 million in sales, a 7.77% increase since Q4. Argan earned $11.87 million, and sales totaled $117.23 million in Q4.

Why ROCE Is Significant

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 Q1, Argan 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.

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

Q1 Earnings Recap

Argan reported Q1 earnings per share at $0.67/share, which beat analyst predictions of $0.34/share.