Return On Equity

The Return On Equity Fundamental Analysis lookup allows you to check this and other indicators for any equity instrument. You can also select from a set of available indicators by clicking on the link to the right. Please note, this module does not cover all equities due to inconsistencies in global equity categorizations. Please continue to Equity Screeners to view more equity screening tools.
  
For most industries, Return on Equity between 10% and 30% are considered desirable to provide dividends to owners and have funds for the future growth of the company. Investors should be very careful using ROE as the only efficiency indicator because ROE can be high if a company is heavily leveraged.

Return On Equity

 = 

Net Income

Total Equity

Return on Equity or ROE tells company stockholders how effectually their money is being utilized or reinvested. It is a useful ratio when analyzing company profitability or the management effectiveness given the capital invested by the shareholders. ROE shows how efficiently a company utilizes investments to generate income.

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.

All Fundamental Indicators

Pair Trading with Investor Education

One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if Investor Education position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Investor Education will appreciate offsetting losses from the drop in the long position's value.
The ability to find closely correlated positions to Dover could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Dover when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back Dover - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling Dover to buy it.
The correlation of Dover is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as Dover moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Dover moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for Dover can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.
Pair CorrelationCorrelation Matching
Check out Investing Opportunities to better understand how to build diversified portfolios. Also, note that the market value of any private could be closely tied with the direction of predictive economic indicators such as signals in estimate.
You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

Other Consideration for investing

Balance Of Power
Check stock momentum by analyzing Balance Of Power indicator and other technical ratios
Stock Screener
Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook.
Portfolio Analyzer
Portfolio analysis module that provides access to portfolio diagnostics and optimization engine
Efficient Frontier
Plot and analyze your portfolio and positions against risk-return landscape of the market.
Odds Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Idea Optimizer
Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio
CEOs Directory
Screen CEOs from public companies around the world
Bond Analysis
Evaluate and analyze corporate bonds as a potential investment for your portfolios.
Sign In To Macroaxis
Sign in to explore Macroaxis' wealth optimization platform and fintech modules