Return on Equity Calculator
Return on equity is one of the most widely used profitability metrics in fundamental analysis. It measures how much profit a company generates for each dollar of shareholder equity, making it a key indicator of management effectiveness and capital allocation efficiency. This calculator computes basic ROE and also performs a three-factor DuPont decomposition, breaking ROE into net profit margin (how much profit per dollar of sales), asset turnover (how many sales dollars per dollar of assets), and the equity multiplier (how much leverage is used). The DuPont breakdown reveals the quality of the ROE figure and whether improvements are sustainable.
ROE and DuPont formula
ROE = Net Income / Avg Shareholders' Equity * 100
Net Profit Margin = Net Income / Revenue * 100
Asset Turnover = Revenue / Avg Total Assets
Equity Multiplier = Avg Total Assets / Avg Equity
DuPont Check: ROE = Margin% * Turnover * Multiplier
ROE benchmarks by industry
- Technology: 20 to 50%+ ROE typical for established profitable companies.
- Financial services: 10 to 20% ROE is considered healthy.
- Consumer staples: 15 to 30% ROE for branded consumer goods companies.
- Capital-intensive industries (utilities, manufacturing): 8 to 15% ROE.
Return on equity: frequently asked questions
What is return on equity?
Return on equity (ROE) measures how effectively a company uses shareholders' equity to generate profit. ROE = Net Income / Average Shareholders' Equity * 100. A higher ROE indicates more efficient use of equity capital.
What is a good ROE?
ROE benchmarks vary by industry. Technology companies often achieve 20 to 40%+ ROE. Financial services can exceed 10 to 15%. A rule of thumb is that ROE above 15% is considered strong for most industries, though comparing within the same sector is most meaningful.
What is DuPont analysis?
DuPont analysis decomposes ROE into three components: net profit margin (profitability), asset turnover (efficiency), and equity multiplier (leverage). ROE = Profit Margin * Asset Turnover * Equity Multiplier. This reveals which factor is driving ROE changes.
Why can a high ROE be misleading?
High ROE can result from high financial leverage (large debt relative to equity) rather than operational efficiency. A company with very little equity but significant debt can show a high ROE while being financially fragile. Always examine leverage alongside ROE.
How does share buybacks affect ROE?
Share buybacks reduce shareholders' equity, which mechanically increases ROE even if net income stays the same. This is why DuPont analysis is valuable: it shows whether ROE improvement comes from better profitability, efficiency, or simply more leverage.
Sources
- SEC: SEC 10-K Filings (Income and Balance Sheet Data).
- Federal Reserve: Financial Accounts of the United States.
Reviewed by the CalculatorHub team, edited by James Graham, 14 June 2026. See our methodology.