ROE (return on equity)
Annual profit as a percentage of the shareholders' money in the business.
Fundamental ratios
Live NSE examples below
What is ROE?
Return on equity tells you how much profit a company generates with the money its shareholders have put in and left in (equity capital plus accumulated reserves). A company earning 20% ROE and reinvesting its profits can, in principle, compound its book value at close to 20% a year. That is why long-term investors treat sustained high ROE as a hallmark of a good business.
Formula
ROE = net profit (trailing 12 months) ÷ net worth × 100
Net worth = equity share capital + reserves (latest balance sheet)
How to read it
- Sustained ROE above 15-20% is strong for most industries; below 10% barely beats a fixed deposit after risk.
- Check the debt: leverage inflates ROE. Compare ROE with ROCE, since a much higher ROE than ROCE points to borrowing.
- Look at the trend over several years. One high-ROE year can be a one-off gain.
Common mistakes
- Ignoring buybacks and write-offs, which shrink equity and flatter ROE without any improvement in the business.
Live: NSE stocks matching this today
Companies with ROE above 20% 322
| Stock | ROE | ROCE | Debt/Equity |
|---|---|---|---|
| BFUTILITIEBF Utilities Limited | 140.9% | 30.0% | 4.61 |
| PGHHProcter & Gamble Hygiene and Health Care Limited | 104.9% | 157.0% | 0.00 |
| 539533Elitecon International Ltd | 97.1% | — | 1.09 |
| COLPALColgate Palmolive (India) Limited | 85.1% | 108.0% | 0.03 |
| ASALAutomotive Stampings and Assemblies Limited | 79.7% | 25.0% | 3.44 |
| MADRASFERTMadras Fertilizers Limited | 77.8% | 15.0% | 6.89 |
| 500414Timex Group India Ltd | 76.6% | 93.0% | 0.05 |
| HINDZINCHindustan Zinc Limited | 75.4% | 70.0% | 0.39 |
Quality stocks (ROE and ROCE ≥ 15%, low debt) 235
| Stock | ROE | ROCE | Debt/Equity |
|---|---|---|---|
| PGHHProcter & Gamble Hygiene and Health Care Limited | 104.9% | 157.0% | 0.00 |
| 500414Timex Group India Ltd | 76.6% | 93.0% | 0.05 |
| GILLETTEGillette India Limited | 70.6% | 91.0% | 0.00 |
| 514330One Global Service Provider Ltd | 52.3% | 87.0% | 0.00 |
| PGHLProcter & Gamble Health Limited | 68.2% | 84.0% | 0.02 |
| GVT&DGE Vernova T&D India Limited | 48.5% | 76.0% | 0.01 |
| MCXMulti Commodity Exchange of India Limited | 32.9% | 71.0% | 0.00 |
| HINDZINCHindustan Zinc Limited | 75.4% | 70.0% | 0.39 |
Use it on Flash Finance
Related concepts
ROCE (return on capital employed)Operating profit as a percentage of all the capital a business uses, debt included.Debt-to-equity ratioBorrowings compared with shareholders' funds, the basic leverage measure.P/E ratio (price-to-earnings)How many rupees investors pay for one rupee of annual profit.P/B ratio (price-to-book)Market value compared with the accounting value of shareholders' equity.
