Looking Into Archer-Daniels Midland's Return On Invested Capital

According to Benzinga Pro, during Q2, Archer-Daniels Midland ADM earned $1.24 billion, a 16.54% increase from the preceding quarter. Archer-Daniels Midland also posted a total of $27.28 billion in sales, a 15.37% increase since Q1. In Q1, Archer-Daniels Midland earned $1.06 billion, and total sales reached $23.65 billion.

What Is Return On Invested Capital?

Earnings data without context is not clear and can difficult to base trading decisions on. Return on Invested Capital (ROIC) helps to filter signal from noise by measuring yearly pre-tax profit relative to invested capital by a business. Generally, a higher ROIC suggests successful growth of a company and is a sign of higher earnings per share in the future. In Q2, Archer-Daniels Midland posted an ROIC of 2.9%.

It is important to keep in mind that ROIC evaluates past performance and is not used as a predictive tool. It is a good measure of a company's recent performance, but does not account for factors that could affect earnings and sales in the near future.

For Archer-Daniels Midland, the positive return on invested capital ratio of 2.9% suggests that management is allocating their capital effectively. Effective capital allocation is a positive indicator that a company will achieve more durable success and favorable long-term returns.