How high is the return on equity to be considered a good company
Return on equity (ROE) is an important indicator of a company's profitability from its own capital. It represents the earnings from the company's net assets (i.e., shareholders' equity). So, how high is the ROE of a good company?
First of all, let's be clear that ROE is not always better. An excessively high ROE could mean that the company is taking too much risk or that its business model is not stable. Moreover, companies in different industries may have different levels of ROE. For example, a high-risk, high-reward technology sector may have a higher ROE, while a low-risk utilities sector may have a lower ROE.
In general, a healthy, sustainable ROE should be between 10%-20%. Within this range, the profitability of the company is neither too high nor too low, and it is relatively stable. Of course, this is only a general range, and the specific situation needs to be combined with other financial indicators and industry conditions for comprehensive analysis.
In addition, we need to pay attention to the time trend of ROE. A consistently growing ROE usually means that the company's profitability is increasing, while a declining ROE can mean that the company's profitability is weakening.
In conclusion, judging whether a company's ROE is a good company requires a comprehensive consideration of multiple factors. In addition to the ROE itself, it is also necessary to consider the company's industry, business model, financial status and other aspects. Only in this way can we more accurately assess the profitability and investment value of a company.
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