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Looking into HCI Group's Return on Capital Employed

Pulled from Benzinga Pro data HCI Group (NYSE:HCI) showed a loss in earnings since Q1, totaling $7.10 million. Sales, on the other hand, increased by 6.99% to $101.50 million during Q2.

Benzinga · 09/01/2021 11:13

Pulled from Benzinga Pro data HCI Group (NYSE:HCI) showed a loss in earnings since Q1, totaling $7.10 million. Sales, on the other hand, increased by 6.99% to $101.50 million during Q2. HCI Group earned $12.18 million, and sales totaled $94.87 million in Q1.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in HCI Group's Return on Capital Employed, a measure of yearly pre-tax profit relative to capital employed by a business. Generally, a higher ROCE suggests successful growth of a company and is a sign of higher earnings per share in the future. In Q2, HCI Group posted an ROCE of 0.02%.

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

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows HCI Group 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 HCI Group's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Analyst Predictions

HCI Group reported Q2 earnings per share at $0.11/share, which did not meet analyst predictions of $0.67/share.