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Return on Equity Calculator: ROE Formula and Example

How efficiently does the company compound shareholder equity?

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Also available in German: Eigenkapitalrendite berechnen: ROE-Formel, Leverage-Effekt, Beispiel →

Inputs

Net income (m)

Net income

Also called: Net profit, earnings, bottom line

Where to find it: Income statement, very last line.

How to derive: Revenue − all costs, interest and taxes.

Shareholder equity (m)

Shareholder equity

Also called: Net assets, book value

Where to find it: Balance sheet, bottom of the liabilities & equity side.

How to derive: Total assets − total liabilities.

Result, live

Return on equity

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Sustained >15% is the Buffett bar for quality businesses. Beware negative equity from buybacks.

Return on equity (ROE) shows how much profit a company earns on the shareholder equity it employs. It is Warren Buffett's favourite quality gauge: a business that sustains more than 15% compounds owners' capital above average.

How the formula works

You divide net income by shareholder equity and express it in percent. The higher it is, the more efficiently management works with the owners' capital.

ROE = net income ÷ equity × 100

Example: $500m profit on $3,200m equity. ROE = 500 ÷ 3,200 × 100 = 15.6%: just above the quality bar.

How to read the result

Above 15%: strong, Buffett's quality level.
8 to 15%: decent but unremarkable.
Below 8%: weak, the capital works too little.

What to watch out for

High debt inflates ROE artificially, read it alongside the debt-to-equity ratio.
With negative equity (often from buybacks) the ratio is meaningless.
One-off gains or write-downs distort a single year, watch the trend.

Return on equity by sector

A return on equity only means something next to the company's own sector: asset-light business models reach high returns on equity easily, capital-intensive ones rarely. The table shows median and range for every sector from our database, updated daily.

Return on equity by sector: median and range
Sector	Lower quartile	Median	Upper quartile	Stocks
Real Estate	-0.9 %	3.9 %	9.1 %	1,761
Health Care	-12.8 %	4.0 %	12.4 %	2,235
Communication Services	-5.6 %	4.1 %	13.2 %	1,046
Materials	-1.4 %	4.9 %	12.2 %	3,301
Consumer Discretionary	0.0 %	6.1 %	13.6 %	3,419
Information Technology	-1.3 %	6.6 %	15.4 %	3,402
Consumer Staples	0.3 %	7.0 %	14.2 %	1,656
Industrials	0.7 %	7.3 %	14.2 %	5,232
Energy	-1.7 %	7.4 %	15.4 %	919
Utilities	2.8 %	7.8 %	12.5 %	666
Financials	2.9 %	9.5 %	15.1 %	3,103

Source: the Fair Value Calculator database, 26,740 stocks with a valid value for Return on equity, as of Oct 27, 2026. Median: half of the sector's stocks sit below it. Lower and upper quartile: 25 % sit below or above. Values move daily with prices. All valuation ratios by sector →

Return on equity by industry and sector: all industries, quartiles, CSV →

Frequently asked questions

Why is 15% seen as the quality bar?

Above that mark a company compounds equity better than the broad market over time, a sign of a genuine competitive advantage.

Can ROE be too high?

Yes. Figures above 40% often rest on heavy debt or thin equity after buybacks rather than genuine earning power.

Where do I find net income and equity?

In our Fair Value Calculator net income, equity and ROE are already on file for 40,000+ stocks, no typing required.

What value is normal in my sector?

See the table in the sector comparison section: median and range for every sector from our database, updated daily. A value near the median of the company's own sector is usual; well below or above it calls for a reason in the business model.

How do I calculate return on equity?

Divide net income after tax by shareholder equity and multiply by 100. Example: $500m profit on $3,200m equity gives 500 ÷ 3,200 × 100 = 15.6%. It gets more precise with the average of equity at the start and at the end of the year, because equity changes during the year.

What is the leverage effect?

If a company borrows at an interest rate below the return on its total capital, the difference goes to shareholders: return on equity rises although the business is not doing any better. Example before tax: 10% return on total capital, 4% interest and as much debt as equity give 10% + (10% − 4%) × 1 = 16% return on equity. If interest is above the return on total capital, the same lever pushes the return down. The debt-to-equity ratio calculator shows how high the debt is.

What is the difference between return on equity and return on assets?

Return on equity measures profit against the shareholders' money only, return on assets against everything the company owns, financed by equity and debt alike. When the two are far apart, the company carries a lot of debt: a high return on equity is then partly borrowed.