Looking Into IHS Markit's Return On Capital Employed

Looking at Q2, IHS Markit INFO earned $275.60 million, a 18.08% increase from the preceding quarter. IHS Markit also posted a total of $1.18 billion in sales, a 5.45% increase since Q1. In Q1, IHS Markit earned $233.40 million, and total sales reached $1.12 billion.

What Is Return On Capital Employed?

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 Q2, IHS Markit posted an ROCE of 0.03%.

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.

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows IHS Markit 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 IHS Markit's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q2 Earnings Insight

IHS Markit reported Q2 earnings per share at $0.81/share, which beat analyst predictions of $0.8/share.