Return on equity (ROE)
Contents
Key points
- Together with P/B it is the key measure for valuing banks and financials.
- ROE above the policy rate and inflation shows the company creates value.
- high debt artificially lifts ROE.
Formula / calculation
ROE = Annualised net profit / Average equity × 100. The DuPont decomposition splits ROE into three components: Net margin × Asset turnover × Leverage (Assets/Equity).
Interpretation
ROE above the policy rate and inflation shows the company creates value. High ROE combined with low P/B can signal cheapness; if ROE rises together with leverage, growth is being funded by debt.
Pitfalls
high debt artificially lifts ROE. The ratio is meaningless when equity is negative or tiny. Post inflation-accounting revaluation of equity makes historical comparison harder. One-off profits should be excluded.
High Return on Equity (ROE)
| Stock | Return on equity | Daily |
|---|---|---|
1. BORLSBorlease Otomotiv | 4,481.90% | 0.00% |
2. VKINGViking Kağıt | 1,630.59% | 0.00% |
3. ARZUMArzum Ev Aletleri | 533.99% | 0.00% |
4. CRFSACarrefoursa | 322.36% | 0.00% |
5. TRHOLTera Finansal Yat. Hol. | 191.70% | 0.00% |
6. ULUSEUlusoy Elektrik | 138.25% | 0.00% |
7. KTLEVKatilimevim Tas. Fin. | 132.40% | 0.00% |
8. FORTEForte Bilgi İletişim | 119.69% | 0.00% |
9. SANELSanel Mühendislik | 111.90% | 0.00% |
10. CRDFACreditwest Faktoring | 111.09% | 0.00% |
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Related terms
Frequently asked questions
What is Return on equity (ROE)?
Return on equity is net profit divided by shareholders’ equity and measures how efficiently the company uses shareholder capital.
How is Return on equity (ROE) calculated?
ROE = Annualised net profit / Average equity × 100. The DuPont decomposition splits ROE into three components: Net margin × Asset turnover × Leverage (Assets/Equity).
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