Return on Equity

The Return on Equity, or ROE, measures how efficiently a company uses Shareholders’ Equity to generate profits. It is calculated as the Net Profit for the year, divided by Average Book Value, or Equity, for the period. This is an average of the past 5 years’ earnings data and earnings are normalised.

Stockopedia explains ROE

This is defined as Income available to Common Shareholders (excluding Extraordinaries) divided by the Average Book Value over the period. The DuPont formula is a common way to break down ROE into three important components. Essentially, ROE will equal the Net Margin multiplied by Asset Turnover multiplied by Financial Leverage. Earnings are measured on a normalised basis.

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The 5 highest ROE Stocks in the Market

TickerNameROEStockRank™
LON:PEBPebble Beach Systems578.8769
LON:VICVictorian Plumbing312.9481
LON:RMVRightmove307.2770
LON:WRKSWorks co uk160.4684
LON:FNXFonix149.9280