Learn / Fundamentals / Profitability / ROE
ROE = Net Income ÷ Shareholders' Equity
ROE is how much profit a company makes for each dollar of owners’ money. A high ROE that lasts for years can quietly grow that pile.
01 Feel it first
Pick an ROE preset — 8%, 15%, or 25% — then hit Play 10 years. Watch the bars stack if that return keeps coming and the profit is reinvested.
02 Break the intuition
Two firms can show identical ROE. Reveal which one used a lot of debt to inflate the number.
03 Feel the leverage
Same business swing, different equity result. Pick a debt level, then tap Good year or Bad year and watch ROE-style returns tilt.
Pick leverage, then tap Good year or Bad year.
04 Sort it
Two cards can show the same ROE. Sort each into earned on the business vs inflated by debt.
Tap a card, then sort by how the ROE was earned.
Tap a card, then tap a bucket.
05 Three drivers
ROE can be unpacked into three parts: profit margin, how hard assets work, and how much debt funds those assets. Toggle each piece.
06 Quality check
Read how the return was earned — not just the percentage.
07 Check yourself
08 Where it breaks
Repurchasing shares reduces owners’ equity on the books and can lift ROE without any improvement in the business.
Negative profit or negative equity turns the ratio into nonsense. Do not average those years with normal ones.
Borrowing is how banks work. High bank ROE is normal — compare to other banks, not to a software company.
A single boom or trough year can make ROE look heroic or broken. Prefer a multi-year average.
Pull up any ticker for ROE history and peers — then screen for durable high returns on equity.
Assumes every year's profit is reinvested at the same ROE.
ROE shows how hard owners' money works. Hit play to see it stack up year after year.