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ROE Calculator
Calculate return on equity for any company and see the DuPont breakdown. Is high ROE coming from real profitability, asset efficiency, or dangerous leverage? Enter a ticker to auto-populate — then see exactly where the returns come from.
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Enter net income and equity to see ROE
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What is ROE?
ROE = Net Income ÷ Shareholders' Equity
Return on equity measures how much profit a company generates for every dollar of shareholder equity. If a company has $10 billion in equity and earns $2 billion in net income, its ROE is 20% — meaning shareholders earn 20 cents of profit on every dollar of book value.
ROE is one of the most widely followed profitability metrics because it directly measures how well management uses shareholder capital. Warren Buffett has called it the single most important variable in determining a stock's long-term investment return.
DuPont analysis: the three drivers of ROE
A high ROE can come from three completely different sources. The DuPont framework breaks it down:
Profit Margin (Net Income ÷ Revenue) — measures pricing power and cost control. A company with high margins earns more profit per dollar of sales.
Asset Turnover (Revenue ÷ Total Assets) — measures how efficiently the company uses its assets to generate revenue. Retailers tend to have high turnover; utilities have low turnover.
Equity Multiplier (Total Assets ÷ Equity) — measures financial leverage. A multiplier of 2× means the company has twice as many assets as equity, implying half is funded by debt.
The product of these three equals ROE. Two companies can both have 20% ROE, but one earns it through high margins (strong business) while the other earns it through high leverage (fragile balance sheet). DuPont analysis tells you which is which.
What ROE looks like by sector
| Sector | Typical ROE |
|---|---|
| Technology | 20–30% |
| Consumer Brands | 18–25% |
| Healthcare / Pharma | 12–20% |
| Industrials | 14–20% |
| Financial Services | 10–15% |
| Energy / Materials | 10–18% |
| Utilities | 8–12% |
| Real Estate | 5–10% |
When ROE misleads
ROE has a well-known flaw: it can be artificially inflated by leverage. A mediocre business earning 8% on assets can show a 24% ROE if it borrows enough. This is why the DuPont decomposition matters — check the equity multiplier before getting excited about a high ROE.
Companies with negative equity (more liabilities than assets) produce meaningless ROE numbers. This includes companies like McDonald's and Starbucks that have aggressively repurchased shares. For these, use ROIC instead, which counts both debt and equity in the denominator.
For a leverage-neutral view of profitability, pair this tool with the debt-to-equity calculator and the profit margin calculator.
Frequently asked questions
What is a good ROE?
An ROE above 15% is generally considered good, and above 20% is excellent. However, context matters: a 25% ROE driven by excessive leverage (high equity multiplier) is riskier than a 20% ROE driven by strong profit margins. Always check the DuPont decomposition to see where the return comes from. The S&P 500 median ROE is roughly 14-16%.
ROE vs ROIC — which is better?
ROIC (return on invested capital) is a cleaner measure of business quality because it uses after-tax operating profit and counts both debt and equity in the denominator. ROE can be artificially inflated by leverage — a company can borrow heavily and boost ROE without improving operations. ROIC strips out the leverage effect. Use ROE for a quick screen, then confirm with ROIC for serious analysis.
What is DuPont analysis?
DuPont analysis breaks ROE into three components: Profit Margin (Net Income ÷ Revenue) × Asset Turnover (Revenue ÷ Total Assets) × Equity Multiplier (Total Assets ÷ Equity). The product of these three equals ROE. This decomposition reveals whether high ROE comes from strong profitability, efficient asset use, or financial leverage. A company with 20% ROE from high margins is fundamentally different from one with 20% ROE from high debt.
Can ROE be too high?
Yes. Very high ROE (above 40-50%) can signal excessive leverage or negative equity. When a company has more liabilities than assets (negative book value), ROE becomes meaningless or misleadingly positive. Companies that have bought back so much stock that equity is near zero (like McDonald's or Starbucks) can show astronomical ROE figures. Always check the equity multiplier — if it's above 5×, leverage is likely inflating the number.