Return on Equity as Indicator of Financial Performance

Rolando Rivera
Jun 7
2 min read

This Newsletter edition breaks down Return on Equity (ROE)—a key metric used to measure how effectively a company turns investor money into profit. It explains general ROE benchmarks, highlights why higher ROE usually signals stronger financial performance, and notes how industry differences affect what’s considered a “good” ROE. Plus, it previews upcoming updates to the Fintech Trades Investment Assessment to include industry context and peer-level comparisons.

Understanding Return on Equity: General Guidelines and Industry Insights

Return on Equity (ROE) is one of the most insightful financial ratios for evaluating how effectively a company uses shareholder capital to generate profit. But what’s considered a “good” ROE?

The table below breaks it down.

General Guidelines for Investment Assessment and ROE Score

Software Roadmap: ROE Variations by Industry

Different industries have different capital needs, risk profiles, and revenue models — and those factors heavily influence what’s considered a healthy ROE:

Technology & Financials Often see ROEs of 15%–25% due to scalable business models and higher margins.

Consumer Goods & Healthcare Typical ROEs fall between 10%–20%, depending on innovation cycles and brand strength.

Utilities & Telecom Capital-intensive industries often post lower ROEs (5%–10%), which are acceptable due to regulated environments.

Retail & Industrial ROEs can range from 8%–15%, with efficiency and inventory management playing a key role.

Final Thoughts

ROE is a quick pulse check on how well a company turns equity into profit. While 15%+ is generally strong, the most valuable insights come from comparing it within an industry and looking at sustainability over time.

Stay tuned for upcoming code updates that incorporate industry context and peer-level comparisons—enhancements that will refine stock selection and scoring in the Fintech Trades Investment Assessment.