ROE Calculator
Return on equity from net income and book equity. Live calculator with worked steps and charts.
Calculator
This valuation ratios calculator runs on standard equity maths: price moves plus dividends minus costs drive returns, payouts drive income, and multiples or discounted cash drive value.
Results
Return on Equity
18.00%
$90,000,000
$500,000,000
Live results update as you type — currently showing return on equity of 18.00%. Replace the defaults with your own prices, payouts and share counts for an exact answer.
Visualizations
ROE (Higher Is Better)
Formula
Profit per dollar of shareholder equity — potent but leverage-flattered, so read with debt in view.
Variables
| Symbol | Name | Unit | Description |
|---|---|---|---|
| NI | Net income | currency | Annual |
| Equity | Equity | currency | Book |
Explanation
This is how hard each equity dollar works in profit terms.
Step-by-Step Calculation
Follow each step to understand how the result is calculated from your inputs.
Take net income to ordinary holders.
Divide by the equity funding it.
Leverage flatters ROE — pair with ROA/ROIC before admiring it.
Worked Examples
See how the calculator works with different scenarios.
Scenario
The roe calculator run on the values above, showing the full calculation path rather than only the answer.
Inputs
Calculation
1. Take net income to ordinary holders. → $90,000,000 2. Divide by the equity funding it. → 18.00% 3. Leverage flatters ROE — pair with ROA/ROIC before admiring it. → High — verify leverage
Result
Return on Equity: 18.00%
Interpretation
This is how hard each equity dollar works in profit terms.
Understanding Your Result
Your Result: Return on Equity: 18.00%
What This Means
This is how hard each equity dollar works in profit terms.
Why It Matters
18.00% ROE ($90,000,000 ÷ $500,000,000).
Professional Interpretation
18.00% ROE ($90,000,000 ÷ $500,000,000).
How this is calculated
Profit per dollar of shareholder equity — potent but leverage-flattered, so read with debt in view.
What drives the result
Every multiple is price divided by something fundamental, so cheapness always depends on the denominator surviving. Enterprise value fixes market cap for debt and cash, forward estimates trade certainty for relevance, and discounted cash flow makes the growth, margin and discount assumptions explicit — the range they produce is the answer, not the midpoint.
Recommendations
- •High ROE from buybacks and leverage is fragile; from margins and turnover it compounds.
- •DuPont it: margin × turnover × leverage shows where the return comes from.
Educational Content
Introduction
Valuation translates stories into multiples and cash into present value. Ratios (P/E, PEG, P/B, P/S, EV/EBITDA) price each dollar of earnings, growth, book, sales and operating cash; DCF, Gordon and intrinsic models discount the future; quality ratios (ROE, ROIC) and yields (earnings, FCF) test whether the price deserves to hold.
Concept Explanation
Every multiple is price divided by something fundamental, so cheapness always depends on the denominator surviving. Enterprise value fixes market cap for debt and cash, forward estimates trade certainty for relevance, and discounted cash flow makes the growth, margin and discount assumptions explicit — the range they produce is the answer, not the midpoint.
Applications
Benefits
- •Puts every holding on the same per-share, per-dollar footing
- •Separates operating performance (ROIC) from leverage flattery (ROE)
- •Makes DCF assumptions auditable instead of hidden in a target price
- •Turns “is it cheap?” into a number with a buffer, not a feeling
Limitations
- •Multiples collapse on negative or cyclical denominators — use the right ratio per situation
- •Terminal value often carries most of a DCF, so small tweaks swing the answer
- •Accounting choices (goodwill, stock comp, leases) distort book, earnings and FCF
- •Cheap stocks can stay cheap for structural reasons the multiple cannot see
Best Practices
- •Compare multiples only within sectors and growth cohorts
- •Use diluted shares and enterprise value for takeover-relevant math
- •Stress every DCF ±2pts on discount and ±1pt on terminal growth
- •Require a 20–40% margin of safety before calling anything a bargain
Common Misconceptions
Practical Tips
- •DuPont-decompose every standout ROE.
- •Sustain 15%+ over years before calling it quality.
Common Mistakes
Assumptions
This calculator makes the following assumptions to provide estimates:
Limitations
Be aware of these limitations when using this calculator:
Frequently Asked Questions
Answers to common questions about this calculator.
High ROE — always great?
Who uses the roe calculator?
How accurate is the roe calculator?
Should I compare total return or price return?
Does rounding change the results?
Are taxes included?
What should I have ready before using these calculators?
How do splits affect historical prices?
Related Calculators
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Related Guides
Deepen your understanding with these educational resources.
How price moves, fees and dividends combine into the return you keep.
Sustainable yields, payout safety and the compounding snowball.
Which multiple when, how DCF works, and what buffer to demand.
Glossary
Technical terms used in mortgage calculations explained in plain language.
- Return on equity (ROE)
- Net income divided by shareholders’ equity.
- Return on invested capital (ROIC)
- After-tax operating profit divided by debt plus equity funding operations.
Authoritative References
Trusted sources and standards referenced by this calculator.
Applicable Standards
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Page Information
2026-09-22
2.0.0
- SEC — Investor.gov: stocks, dividends and corporate actions
- SEC EDGAR — company filings (10-K, 10-Q) for earnings and share counts
- IRS — Topic 404: dividends (qualified vs ordinary)
- Federal Reserve — corporate profits and equity valuations (Z.1)
- S&P Global — S&P 500 earnings and dividend history
- Morningstar — equity research and valuation methodology
Free to use for educational and professional purposes.