Return on Capital Employed Insights for American States Water

After pulling data from Benzinga Pro it seems like during Q2, American States Water AWR earned $37.85 million, a 24.79% increase from the preceding quarter. American States Water also posted a total of $128.41 million in sales, a 9.7% increase since Q1. American States Water earned $30.33 million, and sales totaled $117.06 million in Q1.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in American States Water'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 Q2, American States Water posted an ROCE of 0.06%.

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 American States Water 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 American States Water, 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.