Return On Equity
Asset symbol is not found or was delisted
Indicator Description
Return On Equity | = | Net IncomeTotal Equity |
Return On Equity In A Nutshell
Return on Equity indicator provides good insight as to how shareholders dollars are being used by the firm. If a company's ROE grows over time, it's a good sign that its management has found ways to generate income without much of new capital moving forward. On the other hand, if company's ROE is continuously falling, it could be a sign of upcoming financial distress.
Return on equity is one of the most important measures of the profitability of a firm. Higher ROE are generally favorable to investors because it may imply that the company is more efficient in generating profits. Investors should always check the trend in ROE over time because relying solely on ROE for investment decisions is not always safe. For example it can be artificially influenced by the management or corporate insiders to increase ROE even if revenues and profits remain constant.
Closer Look at Return On Equity
Return on Equity (ROE) shows how efficiently a given company uses shareholders money to generate revenues, profits, and grow the firm. Investors want to see significant returns on their invested capital because this would indicate that the company is using their money effectively. In general the higher the ROE to more satisfied investors are with the current management, so the higher ratios are almost always better than lower ratios. However, since every industry has different criteria for income and profit expectations, ROE cannot be used to compare companies outside of their sectors and industry classifications. Also, company growth that can be derived from a higher ROE does not always get passed onto the investors. If the company decides to retain these profits, the shareholders will only realize this gain by having an appreciated stock and will rely on market timing strategies to realize their investments.
Return on equity is calculated by taking all earnings and dividing them by the average shareholder equity for that accounting period. The income or loss numbers usually come from the company's most recent filing with the SEC or simply from the latest Income Statement. The shareholder-equity numbers can be found on the balance sheet and that represents the assets that the business has generated.
Note that many investors like to also calculate both the beginning and ending ROEs, which allows them to determine the change in profitability over the period. This is an important indicator of company future profitability. To calculate the change in return on equity for a specified period investors use the shareholders equity numbers from the beginning of that period as a denominator to determine the beginning Return on Equity. Then, the end-of-period shareholders equity can be used as the denominator to determine the ending ROE. This also can demonstrate that companies with a negative ROE may not always be a bad investment as their future my look much brighter overall.
Other Suggestions
| M | Macys Inc | Company |
| MBINN | Merchants Bancorp | Company |
| MFD | Macquariefirst Tr Global | Fund |
| MJ | Amplify Alternative Harvest | ETF |
| MXY | ARCA Mexico | Index |
| ME | ME | Cryptocurrency |
| M00020AA1 | INTLWT 595 15 DEC 39 | Corporate Bond |
| MGCUSD | Micro Gold Futures | Commodity |
Analyzing currently trending equities could be an opportunity to develop a better portfolio based on different market momentums that they can trigger. Utilizing the top trending stocks is also useful when creating a market-neutral strategy or pair trading technique involving a short or a long position in a currently trending equity.
Trending Themes
If you are a self-driven investor, you will appreciate our idea-generating investing themes. Our themes help you align your investments inspirations with your core values and are essential building blocks of your portfolios. A typical investing theme is an unweighted collection of up to 20 funds, stocks, ETFs, or cryptocurrencies that are programmatically selected from a pull of equities with common characteristics such as industry and growth potential, volatility, or market segment. | Momentum Invested over 70 shares | |
 | Manufacturing Invested over 40 shares | |
 | Power Assets Invested over 200 shares | |
 | Banking Invested over 30 shares | |
 | Social Domain Invested few shares | |
 | Driverless Cars Invested over 200 shares | |
 | Warren Buffett Holdings Invested few shares | |
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Stocks Directory Find actively traded stocks across global markets |