What Is Return on Equity (ROE)?
ROE measures how much profit a company generates from shareholder equity. It is a core measure of capital efficiency, but the drivers behind a high figure matter as much as the level itself.
ROE formula
ROE = Profit attributable to owners ÷ average equity × 100
The denominator normally averages beginning and ending equity. This better reflects major issuance or buybacks during the period than ending equity alone.
Calculate ROE
Use average beginning and ending equity
Result
Profit generated per 100 of equity
10.00%
This is a simplified calculation. Align consolidation scope, attribution and period basis before comparing companies.
Current ROE distribution in Japan
Price date: October 20, 2026
Trailing ROE median
8.65%
Median return over the trailing 12 months
Forecast ROE median
8.29%
Company forecasts for 3,445 stocks
Trailing interquartile range
4.63% – 14.11%
Range containing the middle 50% of stocks
Stocks with trailing ROE
3,718 / 3,958
240 missing or excluded
Trailing ROE distribution
This covers Japanese stocks with positive equity and a calculable trailing-12-month ROE.
Stocks with negative ROE
Even with positive equity, a trailing net loss produces a negative ROE.
419stocks
11.3%
Check operating margins, cash flow and history to separate one-off losses from deterioration in the core business.
Median trailing ROE by sector
Sectors with at least 10 stocks. Comparing peers helps reduce differences caused by business models.
Examples from large-cap stocks
This is not a recommendation ranking. It connects price, trailing ROE, forecast ROE and P/B using actual data.
- Price
- ¥3,351-3.65%
- Trailing ROE
- 12.60%
- Forecast ROE
- -
- PBR
- 1.66x
- Price
- ¥3,102+0.00%
- Trailing ROE
- 12.23%
- Forecast ROE
- 7.97%
- PBR
- 0.98x
- Price
- ¥18,800+0.13%
- Trailing ROE
- 36.52%
- Forecast ROE
- 35.07%
- PBR
- 14.75x
- Price
- ¥5,810+0.64%
- Trailing ROE
- 12.91%
- Forecast ROE
- 12.84%
- PBR
- 3.95x
- Price
- ¥4,554-6.01%
- Trailing ROE
- 33.27%
- Forecast ROE
- -
- PBR
- 1.41x
- Price
- ¥33,870-1.68%
- Trailing ROE
- 56.89%
- Forecast ROE
- 44.55%
- PBR
- 23.52x
- Price
- ¥3,148-3.85%
- Trailing ROE
- 11.17%
- Forecast ROE
- 10.56%
- PBR
- 1.49x
- Price
- ¥3,960+0.00%
- Trailing ROE
- -2.66%
- Forecast ROE
- -
- PBR
- 2.78x
How to interpret ROE
Negative
Loss-making; assess whether losses are temporary
0–5%
Lower efficiency; examine improvement potential
5–10%
Compare with sector and company history
10–15%
Meaningful profitability; test sustainability
15%+
High, but check leverage and one-off gains
These ranges organize interpretation; they are not fixed investment rules. Capital intensity and regulation differ, so compare like-for-like sectors and periods first.
Judge ROE against the cost of equity, the return shareholders require. For the business as a whole, compare ROIC with WACC (weighted average cost of capital). Returns above the cost of capital →
Use DuPont analysis to explain ROE
ROE = Net margin × asset turnover × financial leverage
Net margin
How much final profit remains from sales through pricing power and cost control.
Asset turnover
How efficiently assets are converted into revenue.
Financial leverage
How many assets are supported by each unit of equity; borrowing tends to raise it.
How ROE relates to P/B, P/E and BPS
PBR ≈ PER × ROE (decimal)
On aligned earnings and equity bases, earnings valuation through P/E and capital efficiency through ROE combine into P/B. Use 0.10 for a 10% ROE.
ROE ≈ EPS ÷ average BPS
Per-share values show how much EPS is generated from average beginning-and-ending BPS, provided share and period bases are aligned.
Four traps behind high ROE
Small equity base
After losses or impairment shrink equity, ordinary profit can create an unusually high ROE.
Heavy borrowing
Leverage lifts ROE but increases sensitivity to interest rates and earnings declines.
One-off gains
Asset sales or tax effects can temporarily inflate profit and produce unsustainable ROE.
Share buybacks
Buybacks reduce equity and can lift ROE. Review EPS and per-share value at the same time.
How Stock Club calculates and aggregates ROE
Aggregation rules designed for comparability
- Trailing ROE uses a consistent trailing-12-month value without mixing quarterly cumulative figures.
- Forecast ROE based on company guidance is displayed separately from trailing ROE.
- The denominator is generally average equity attributable to owners of the parent.
- Stocks with zero or negative equity are excluded because the ROE sign becomes misleading.
- The universe is active Japanese equities excluding ETFs and REITs.
- We publish medians and quartiles rather than an outlier-sensitive mean.
This page is for information only and does not recommend any security.
ROE FAQ
What is considered a high ROE?
There is no universal cutoff. While 10% is often referenced, compare sector, company history, cost of equity and leverage on a consistent basis.
Is a higher ROE always better?
No. ROE can rise because equity is small, debt is high or one-off gains occur. Review earnings quality and balance-sheet risk.
What does a negative ROE mean?
With positive equity, it normally reflects a net loss. If equity is also negative, the sign becomes counter-intuitive and unsuitable for simple comparison.
How do trailing and forecast ROE differ?
Trailing ROE uses historical profit. Forecast ROE uses company guidance and can change with revisions or assumptions.
How are ROE and ROA different?
ROE measures profit against shareholder equity, while ROA uses total assets. ROA helps reveal whether high ROE comes from operating efficiency or leverage.
Put ROE into practice
Compare peers in the screener, then combine ROE with P/B, P/E, BPS and DOE to assess profitability, valuation, capital structure and distributions.