Walt Disney (NYSE: DIS) saw a 117.26% drop in earnings compared to the fourth quarter. Sales increased by 10.48% to $ 16.25 billion in the previous quarter. Despite the increase in sales this quarter, the decline in earnings may indicate that Walt Disney is not utilizing their capital as effectively as possible. In the fourth quarter, Walt Disney brought in $ 14.71 billion in sales, but lost $ 846.00 million in revenue.
What is a return on capital?
Return on capital used is a measure of the annual profit before tax in relation to capital used in a business. Changes in earnings and sales indicate shifts in the company’s ROCE. A higher ROCE is usually representative of a successful growth of a company and is a sign of higher earnings per share in the future. A low or negative ROCE indicates the opposite. In the first quarter, Walt Disney achieved a ROCE of 0.0%.
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Remember, while ROCE is a good measure of a company’s recent performance, it is not a very reliable predictor of a company’s earnings or sales in the near future.
ROCE is an important benchmark for comparing similar companies. A relatively high ROCE shows that Walt Disney may be operating at a higher level of efficiency than other companies in its industry. If the company with its current capital level makes high profits, some of the money can be reinvested in more capital, which usually leads to higher returns and growth per share.
For Walt Disney, the return on capital ratio shows that the number of assets can actually help the company achieve higher returns. This is an important note that investors will take into account when measuring the payout of long-term financing strategies.
Q1 Earnings from earnings
Walt Disney reported Q1 earnings per share at $ 0.32 per share, beating analysts’ forecasts of $ -0.41 per share.