INVESTIK FUTURE ROE CALCULATOR
Return on Equity — Measure a Company's Profitability with Shareholder Funds
Live Calculator
Calculate ROE and DuPont components to assess how efficiently a company generates profit from shareholders' equity
Company Financials
Net Profit (₹ Cr)
₹500 Cr
₹
ℹ️ Net profit after tax from the income statement (in ₹ Crore)
Shareholders' Equity (₹ Cr)
₹2,500 Cr
₹
ℹ️ Total equity from balance sheet (paid-up capital + reserves)
Total Revenue (₹ Cr)
₹5,000 Cr
₹
ℹ️ Total revenue / net sales from the income statement
Total Assets (₹ Cr)
₹8,000 Cr
₹
ℹ️ Total assets from balance sheet (used for DuPont analysis)
Equity Utilisation
0%
ROE
Equity
Net Profit
ROE & DuPont Summary
Net Profit Margin
0%
Asset Turnover Ratio
0x
Equity Multiplier
0x
Basic ROE (Net Profit / Equity)
0%
DuPont ROE
0%
📊 Enter financials to evaluate ROE quality
ROE vs Net Profit Margin — Scenario Analysis
Basic ROE %
DuPont ROE %
Net Profit Margin Scenario Breakdown
| Net Margin % | Net Profit (₹ Cr) | Basic ROE % | Asset Turnover | DuPont ROE % |
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📚 ROE Knowledge Hub
Master Return on Equity — the metric Warren Buffett swears by!
📈 What is Return on Equity (ROE)?
ROE measures how much net profit a company generates for every rupee of shareholders' equity. It answers: "How efficiently is management using investors' money?" A consistently high ROE (15%+) over many years is one of the strongest indicators of a great business with competitive advantages. Warren Buffett specifically looks for companies with ROE above 15% for 10+ consecutive years. 🏆
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Basic Formula
Net Profit / Equity
ROE = Net Profit ÷ Shareholders' Equity × 100. Simple, powerful, and the starting point for every fundamental analyst.
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Benchmark ROE
15%+ is Good
ROE above 15% is generally considered strong. Above 20% is excellent. Below 10% needs further investigation for the industry context.
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DuPont Analysis
3 Drivers
DuPont breaks ROE into: Net Profit Margin × Asset Turnover × Equity Multiplier. Each driver tells a different story about the business.
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High Debt Warning
Check Equity Multiplier
A high ROE from a very high Equity Multiplier (3x+) may be driven by debt, not operational excellence. Always check the DuPont breakdown.
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Consistency Matters
10-year trend
One year of high ROE is noise. 10 years of 20%+ ROE is signal — it indicates a durable competitive advantage or economic moat.
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Industry Context
Compare peers
ROE benchmarks differ by sector. Banks, FMCG, and IT companies can have very different natural ROE ranges. Always compare within the industry.
DuPont
3-Factor Model
🔬 DuPont Analysis — Decompose Your ROE!
The DuPont formula breaks ROE into three levers: Profitability × Efficiency × Leverage. This reveals why a company has a certain ROE — whether it's from strong margins, efficient asset use, or financial leverage. Two companies can have the same ROE but very different risk profiles.
📊 NPM = Net Profit ÷ Revenue
🔄 AT = Revenue ÷ Total Assets
🏦 EM = Total Assets ÷ Equity
💡 Smart ROE Analysis Tips
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Always look at 5–10 year ROE trend — A single year's ROE can be distorted by one-time items. Consistent high ROE over a decade is the hallmark of a great business.
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Use DuPont to identify the source — High ROE from high margins (IT, FMCG) is superior to high ROE from high leverage (banks, NBFCs). Dig into the driver.
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Compare with industry peers — A 12% ROE in capital-intensive steel industry may be excellent, while 12% in an asset-light software company may indicate underperformance.
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Watch for buybacks inflating ROE — Share buybacks reduce equity, which mechanically raises ROE without improving operations. Always check if equity is shrinking.
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Pair ROE with ROCE — ROE measures return on equity; ROCE measures return on total capital employed. Together they give a complete picture of capital efficiency.
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High ROE + Low Debt = Moat — A company that consistently generates 20%+ ROE with minimal debt has a genuine competitive advantage. That's the sweet spot for long-term investors.
❓ Frequently Asked Questions
What is a good ROE for Indian companies?
For most sectors, an ROE of 15–20% is considered good in India. FMCG and IT companies often deliver 25–40%+ due to asset-light models. Banks and NBFCs are evaluated differently — typically 12–18% is considered healthy for financials.
Can ROE be too high?
Yes. An abnormally high ROE (50%+) warrants scrutiny. It may result from excessive debt (high equity multiplier), share buybacks reducing equity base, or one-time extraordinary profits. Use DuPont to diagnose the cause before concluding it's a great business.
What is the difference between ROE and ROA?
ROE = Net Profit / Shareholders' Equity. ROA = Net Profit / Total Assets. ROE measures returns to equity holders; ROA measures how efficiently the company uses all its assets. ROE = ROA × Equity Multiplier — the DuPont link between the two.
Why does Warren Buffett focus on ROE?
Buffett looks for companies with ROE above 15% consistently over 10+ years, with low or no debt. Such companies demonstrate a durable moat — they consistently earn more than their cost of capital without relying on leverage, making them compounding machines.
How does negative equity affect ROE?
If a company has negative equity (accumulated losses exceed paid-up capital), ROE becomes meaningless or misleading. A positive net profit divided by negative equity gives a negative ROE, which cannot be interpreted as returns. Avoid using ROE in such cases.