Return on Equity (ROE)

Net income as a percentage of shareholders' equity — how efficiently a company generates profit from the capital its shareholders have invested.

Return on Equity (ROE) — Net income as a percentage of shareholders' equity — how efficiently a company generates profit from the capital its shareholders have invested.

Key facts

Category
Profitability
Definition
Net income as a percentage of shareholders' equity — how efficiently a company generates profit from the capital its shareholders have invested.
Formula
ROE = Net Income / Shareholders' Equity
Live example
/research/stock/AAPL
Last updated
2026-06-17

Formula

ROE = Net Income / Shareholders' Equity

Worked example

A company with $500M net income and $2.5B shareholders' equity has ROE of 20% — for every $1 of shareholder capital, it generated $0.20 in profit this year.

Interpretive bands

ROE < 10%
Below average — capital not generating strong returns. Watch for sector context (capital-intensive industries are structurally low-ROE).
ROE 10 – 20%
Solid range. Most consistently profitable large-caps sit here.
ROE > 20%
Excellent. Common for brand-strong consumer staples, asset-light technology, and well-managed financials.

How IndexAlpha uses Return on Equity (ROE)

ROE drives a meaningful portion of the Profitability score. IndexAlpha tracks 3-year, 5-year, and 10-year ROE trends to flag whether returns are stable, expanding, or eroding.

See it live

The Return on Equity (ROE) metric shows up on every IndexAlpha research page. See it now on AAPL — or research any stock to view its Return on Equity (ROE).

Related terms

Common questions

What is Return on Equity (ROE)?

Net income as a percentage of shareholders' equity — how efficiently a company generates profit from the capital its shareholders have invested.

How is Return on Equity (ROE) calculated?

ROE = Net Income / Shareholders' Equity. A company with $500M net income and $2.5B shareholders' equity has ROE of 20% — for every $1 of shareholder capital, it generated $0.20 in profit this year.

How does IndexAlpha use Return on Equity (ROE)?

ROE drives a meaningful portion of the Profitability score. IndexAlpha tracks 3-year, 5-year, and 10-year ROE trends to flag whether returns are stable, expanding, or eroding.

Sources