Return on Capital Employed Insights for Sterling Construction Co

After pulling data from Benzinga Pro it seems like during Q2, Sterling Construction Co STRL earned $32.72 million, a 43.79% increase from the preceding quarter. Sterling Construction Co also posted a total of $401.67 million in sales, a 27.39% increase since Q1. In Q1, Sterling Construction Co earned $22.75 million, and total sales reached $315.32 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, Sterling Construction Co posted an ROCE of 0.11%.

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 Sterling Construction Co 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 Sterling Construction Co's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Analyst Predictions

Sterling Construction Co reported Q2 earnings per share at $0.69/share, which beat analyst predictions of $0.52/share.