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Metric · Profitability

Return on Equity (ROE) Explained

Q: What is a good ROE value?

As a rough guide, an ROE above 15% is considered strong, below 10% weak. But the industry-typical value varies significantly.

Q: Why can a high ROE also be a warning sign?

Because high debt artificially inflates ROE without operating profitability having actually improved. It's worth also looking at return on assets (ROA) and the debt ratio.

Return on equity (ROE) measures how much profit a company generates relative to its equity. It's considered a central metric for the profitability of a business model.

Updated 20266 min read

Formula

ROE = Net income ÷ Equity × 100

> 15%Strong return on equity

10–15%Solid return on equity

< 10%Weak return on equity

Guideline values, industry-dependent, illustrative

The formula in detail

The components of the formula at a glance.

Numerator

Net income

The after-tax profit from the income statement.

Denominator

Equity

The company's book equity.

ROE calculator

Enter your own figures and see the value instantly.

Net income (€m)

Equity (€m)

Result ROE

Strong return on equity

15.0%

An ROE above 15% is considered strong in many industries. The company generates above-average profit from every euro of equity employed.

An ROE below 10% points to weaker capital efficiency, though this can be typical for the industry (e.g. capital-intensive sectors).

A very high ROE can also result from high leverage (debt). Always view ROE alongside the debt ratio.

Typical industry ranges

Typical value range per sector, for orientation.

Energy

9.0–24.8%

Technology

9.7–28.7%

Industrials

9.1–20.3%

Consumer Defensive

7.8–21.7%

Financial Services

9.2–18.4%

Basic Materials

6.7–18.6%

Consumer Cyclical

6.5–23.9%

Healthcare

7.7–19.0%

Communication Services

5.7–20.1%

Utilities

7.7–12.4%

Real Estate

4.8–10.8%

Aggregated sector values (median band). Data as of Nov 15, 2026

Threshold slider

How many sectors meet a threshold?

Move the threshold and see how many of the sectors shown above sit below or above it with their median.

Bounded preview

Threshold for ROE12.2%

Comparison

6 of 11 sectors meet the thresholdBased on the aggregated sector medians above, not on individual companies.

What the metric looks like at large companies

Data as of Nov 15, 2026

Name	Sector	Value	Sector median
Apple Inc.	Technology	117.9%	16.7%
Alphabet Inc Class A	Communication Services	34.8%	11.4%
Amazon.com Inc	Consumer Cyclical	22.0%	12.2%
Space Exploration Technologies Corp. Class A Common Stock	Industrials	-11.9%	14.0%
Saudi Aramco	Energy	27.4%	17.2%
Eli Lilly and Company	Healthcare	68.5%	11.8%

Selection: the company with the highest market cap in each sector. Not a recommendation, only worked examples with real values.

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Used in these strategies

Magic Formula: Value + QualityGood companies at cheap prices: two factors, one score.Levermann Strategy (13 Criteria)13 criteria in one structured check, each scoring +1, 0 or −1.

Frequently asked questions

What is a good ROE value?

As a rough guide, an ROE above 15% is considered strong, below 10% weak. But the industry-typical value varies significantly.

Why can a high ROE also be a warning sign?

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Not investment advice. This explanation is for informational purposes only and does not constitute a recommendation to buy or sell securities.