Looking Into Cal-Maine Foods's Return On Invested Capital

According to Benzinga Pro, during Q2, Cal-Maine Foods CALM earned $198.29 million, a 58.47% increase from the preceding quarter. Cal-Maine Foods also posted a total of $801.70 million in sales, a 21.78% increase since Q1. In Q1, Cal-Maine Foods earned $125.13 million, and total sales reached $658.34 million.

Why Is ROIC Significant?

Return on Invested Capital is a measure of yearly pre-tax profit relative to capital invested by a business. Changes in earnings and sales indicate shifts in a company's ROIC. A higher ROIC 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 ROIC suggests the opposite. In Q2, Cal-Maine Foods posted an ROIC of 13.79%.

Keep in mind, while ROIC 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.

ROIC is a powerful metric for comparing the effectiveness of capital allocation for similar companies. A relatively high ROIC shows Cal-Maine Foods 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 invested capital, some of that money can be reinvested in more capital which will generally lead to higher returns and, ultimately, earnings per share (EPS) growth.

For Cal-Maine Foods, the positive return on invested capital ratio of 13.79% 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.

Upcoming Earnings Estimate

Cal-Maine Foods reported Q2 earnings per share at $4.07/share, which did not meet analyst predictions of $4.24/share.

This article was generated by Benzinga's automated content engine and reviewed by an editor.