According to Benzinga Pro data Cardinal Health (NYSE:CAH) posted a 81.99% decrease in earnings from Q1. Sales, however, increased by 3.39% over the previous quarter to $45.46 billion. Despite the increase in sales this quarter, the decrease in earnings may suggest Cardinal Health is not utilizing their capital as effectively as possible. In Q1, Cardinal Health earned $272.00 million and total sales reached $43.97 billion.
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, Cardinal Health posted an ROIC of 6.37%.
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.
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, Cardinal Health posted an ROIC of 6.37%.
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.
For Cardinal Health, the positive return on invested capital ratio of 6.37% 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
Cardinal Health reported Q2 earnings per share at $1.27/share, which beat analyst predictions of $1.23/share.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
