Looking into Ritchie Bros Auctioneers's Return on Capital Employed

After pulling data from Benzinga Pro it seems like during Q2, Ritchie Bros Auctioneers RBA earned $89.49 million, a 100.16% increase from the preceding quarter. Ritchie Bros Auctioneers also posted a total of $396.36 million in sales, a 19.55% increase since Q1. In Q1, Ritchie Bros Auctioneers earned $44.71 million, and total sales reached $331.56 million.

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 Q2, Ritchie Bros Auctioneers posted an ROCE of 0.08%.

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

Upcoming Earnings Estimate

Ritchie Bros Auctioneers reported Q2 earnings per share at $0.55/share, which did not meet analyst predictions of $0.61/share.