What Is Return on Equity (ROE)?

Return on equity (ROE) measures how efficiently a company turns shareholders’ money into profit.

ROE = net income ÷ shareholders’ equity

An ROE of 20% means the company earns $20 of profit a year for every $100 of equity owners have in the business. Higher generally means a more efficient, more profitable business.

How to read it

• Under 10% — modest
• 10–20% — solid
• Over 20% — excellent (the hallmark of high-quality compounders)

The catch: ROE can be inflated by debt or share buybacks, both of which shrink equity (the denominator). A sky-high ROE on a company with lots of debt or negative equity isn’t the same as one earned cleanly. Always read ROE alongside debt levels and the Altman Z-score .

Filter by minimum ROE in the screener , and see return on assets for a debt-proof cousin of this metric.