ROE: Measuring Capital Profitability

ROE (Return on Equity) measures a company's profitability on shareholders' equity. It's a key criterion in value investing to identify firms generating the most profits from investors' capital.

What is ROE and why it matters in value investing

ROE is calculated as: ROE = (Net Income / Shareholders' Equity) × 100. It shows how many dollars of profit a company generates per dollar of shareholder investment.

A high ROE signals an efficient business that can reinvest profits for growth without diluting shareholders. In value investing, target ROE above 15% over 5-10 years to filter leaders.

Example: Comparing two European banks

Pour aller plus loin, utilisez notre calculateur de valeur intrinsèque pour estimer une fourchette de valeur sur un ticker, et parcourez les autres articles du blog ainsi que la page Définition pour approfondir les concepts d'investissement de valeur.