ROE Explained: Return on Equity for Investors

ROE explained: what return on equity means, how to interpret ROE, and how investors use it to judge business quality.

What is ROE?

Return on Equity (ROE) measures how efficiently a company generates profits from shareholder equity. Higher ROE can indicate a strong business, but context matters.

How investors use ROE

  • Compare to competitors in the same industry
  • Look for consistency over time
  • Watch for high ROE driven by excessive leverage (debt)

Screen for quality

Use the screener to filter for profitability and safety metrics together.

Open screenerFundamental analysis

FAQs

What is a good ROE?▼

It depends on industry. Many investors look for ROE above ~15%, but stability and leverage levels are important too.

Can ROE be misleading?▼

Yes. High debt can inflate ROE. Review debt-to-equity and cash flow alongside ROE.

Related

Fundamental analysisValue investing

Intrinsic Investor is for education and research only. Not financial advice.