Indicates what return
a company is generating on the owners' investment.
Things to remember
If new shares are issued then
use the weighted average of the number of shares throughout
the year.
For high growth companies you
should expect a higher ROE.
Averaging ROE over the past 5-10
years can give you an idea of the historical
growth.
[Click
on the buttons above to see the financial statements]
For Cory's Tequila Co.
$2,096
=
0.18
$11,678
Return on Equity Analysis:
Sometimes ROE is referred to as stockholder's return on investment,
it tells us the rate that shareholders are earning on their shares. Cory's Tequila Co. is earning a very respectable 18% on shareholder's
equity. But ROE is often misunderstood, for example if the return
on equity is 10% then ten cents of assets are created for each
dollar that was originally invested. Companies that generate
high returns relative to their shareholder's equity are companies
that pay their shareholders off handsomely, creating substantial
assets for each dollar invested. These businesses are more than
likely self-funding companies that require no additional debt
or equity investments.
Disnat is a division of Desjardins Securities. Desjardins Securities is a member of the Investment Industry Regulatory
Organization of Canada (IIROC)
and a member of the Canadian Investor Protection Fund.
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