ROE Calculator

ROE: Return on Equity

ROE tells you how much profit ends up in shareholders' hands, calculated as ROE = Net Income / Average Equity · 100%. Take net income of R$ 100,000 sitting on equity of R$ 500,000, and you get a 20% ROE. Want to know where that number comes from? The DuPont decomposition splits it into ROE = Net Margin · Asset Turnover · Leverage, so you can see whether the return is driven by pricing, by efficiency, or just by debt. For reference, Itaú Unibanco runs around 22%, Vale lands somewhere in the 15–25% band, Petrobras bounces between 10% and 30% as commodities move, and big tech routinely clears 25%. Be careful with a sky-high ROE, though. It can simply mean the company is leveraged to the hilt, which is why the debt-to-equity ratio deserves a look. When ROE stays above 15% cycle after cycle, that usually points to a real competitive moat.

Applications and context

ROE sits at the heart of fundamental analysis and equity valuation. In the Gordon growth model, for instance, the fair price-to-book multiple ties straight back to ROE and the payout ratio. It's also the metric most people reach for when they compare companies in the same sector (banks, retail, utilities) or want to see how management has performed across the years.

FAQ

Why use average equity instead of end-of-period equity? Profit accumulates across the entire period, not on the last day of it. Taking the average of opening and closing equity keeps the ratio honest when dividends, buybacks, or capital raises shift the equity base mid-year.

Is a higher ROE always better? Not necessarily. An extreme reading often says more about leverage than about how well the business actually runs. Read it next to ROA and the debt ratios before you draw a conclusion.

ROE vs ROIC — what's the difference? ROIC works off total invested capital, equity plus debt, so it captures pure operating performance. ROE looks only at what the shareholder earns once the financing decisions are baked in.