XPEL Earnings Perspective: Return On Invested Capital

According to Benzinga Pro data XPEL XPEL posted a 25.54% decrease in earnings from Q3. Sales, however, increased by 2.34% over the previous quarter to $70.13 million. Despite the increase in sales this quarter, the decrease in earnings may suggest XPEL is not utilizing their capital as effectively as possible. XPEL reached earnings of $8.33 million and sales of $68.53 million in Q3.

What Is ROIC?

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 Q4, XPEL posted an ROIC of 13.13%.

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.

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 Q4, XPEL posted an ROIC of 13.13%.

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 XPEL, the positive return on invested capital ratio of 13.13% 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.