ROE

ROE = Net Income / Shareholder's Equity * 100%

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ROE is calculated by dividing net income by the value of shareholder's equity. 
The main difference from the ROA indicator is that ROE shows the effectiveness of not all capital, but only the part that belongs to the owners.
For analysis, it is necessary to look at historical data. In addition, when analyzing, investors compare this ratio with the industry average or ROE of companies within the same industry.

 

For analysis it is necessary to:
1. Look at historical data and change in ROE of the company. If ROE is gradually growing, then the company is developing.
2. Compare with the percentage of alternative returns / low-risk assets to understand how effectively the funds are invested. If the ROE is lower than the bank deposits, for example, it is unprofitable to invest in this company.
3. Compare with industry averages. If the ROE of the company is higher than that of competitors, then it is more attractive for investment.

 

According to Ranks methodology, this indicator is analyzed in the Financial position block and used along with other indicators to calculate the score.