INVESTIK FUTURE ROE CALCULATOR
Return on Equity β 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 (βΉ Cr)
βΉ500 Cr
βΉ
βΉοΈ Net profit after tax from the income statement (in βΉ Crore)
Shareholders' Equity (βΉ Cr)
βΉ2,500 Cr
βΉ
βΉοΈ Total equity from balance sheet (paid-up capital + reserves)
Total Revenue (βΉ Cr)
βΉ5,000 Cr
βΉ
βΉοΈ Total revenue / net sales from the income statement
Total Assets (βΉ Cr)
βΉ8,000 Cr
βΉ
βΉοΈ 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%
π Enter financials to evaluate ROE quality
ROE vs Net Profit Margin β Scenario Analysis
Basic ROE %
DuPont ROE %
Net Profit Margin Scenario Breakdown
| Net Margin % | Net Profit (βΉ Cr) | Basic ROE % | Asset Turnover | DuPont ROE % |
|---|
π ROE Knowledge Hub
Master Return on Equity β the metric Warren Buffett swears by!
π 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. π
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Basic Formula
Net Profit / Equity
ROE = Net Profit Γ· Shareholders' Equity Γ 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 Γ Asset Turnover Γ 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 β 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
π¬ DuPont Analysis β Decompose Your ROE!
The DuPont formula breaks ROE into three levers: Profitability Γ Efficiency Γ Leverage. This reveals why a company has a certain ROE β whether it's from strong margins, efficient asset use, or financial leverage. Two companies can have the same ROE but very different risk profiles.
π NPM = Net Profit Γ· Revenue
π AT = Revenue Γ· Total Assets
π¦ EM = Total Assets Γ· Equity
π‘ Smart ROE Analysis Tips
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Always look at 5β10 year ROE trend β 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 β 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 β 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 β 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 β 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 β A company that consistently generates 20%+ ROE with minimal debt has a genuine competitive advantage. That's the sweet spot for long-term investors.
β Frequently Asked Questions
What is a good ROE for Indian companies?
For most sectors, an ROE of 15β20% is considered good in India. FMCG and IT companies often deliver 25β40%+ due to asset-light models. Banks and NBFCs are evaluated differently β typically 12β18% 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 Γ Equity Multiplier β 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 β 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.