The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to generate profits from its shareholders investments in the company. In other words, the return on equity ratio shows how much profit each dollar of common stockholders’ equity generates.
So a return on 1 means that every dollar of common stockholders’ equity generates 1 dollar of net income. This is an important measurement for potential investors because they want to see how efficiently a company will use their money to generate net income.
ROE is also and indicator of how effective management is at using equity financing to fund operations and grow the company.
The return on equity ratio formula is calculated by dividing net income by shareholder’s equity.
Return on equity measures how efficiently a firm can use the money from shareholders to generate profits and grow the company. Unlike other return on investment ratios, ROE is a profitability ratio from the investor’s point of view—not the company. In other words, this ratio calculates how much money is made based on the investors’ investment in the company, not the company’s investment in assets or something else.
XOMA Corp (NASDAQ:XOMA) was able to keep return on equity at 301.10% in the trailing twelve month while Reuters data showed that industry’s average stands at 1.71% and sector’s optimum level is 15.97%. The stock, after opening at $1.43, closed at $1.38 by losing -2.82%. The last session’s volume of 2.01 million shares was lower than its average volume of 6.49 million shares.
International Business Machines Corp. (NYSE:IBM) maintained return on equity for the last twelve months at 104.68%, higher than what Reuters data shows regarding industry’s average. The average of this ratio is 24.81% for the industry and sector’s best figure appears 12.97%. The stock has gained 1.32%, reaching at $138.54 after hovering between $137.25 and $138.91.
In the last 12 months, Exelixis, Inc. (NASDAQ:EXEL) generated 140.60% in income from the money shareholders have invested. Reuters provide figures showing that industry’s suggest 1.71% and broadly in sector 15.97% seems favorable. The stock has lost -2.33%, reaching at $5.45 after hovering between $5.43 and $5.65. The overall volume in the last trading session was 3.71 million shares. Its fifty two weeks range was $1.26 – $6.80. The total market capitalization remained at $1.27 billion.