While some investors are already well versed in financial metrics (hat tip), this article is for those who would like to learn about Return On Equity (ROE) and why it is important. We’ll use ROE to examine Shanghai Henlius Biotech, Inc. (HKG:2696), by way of a worked example.
Return on equity or ROE is a key measure used to assess how efficiently a company’s management is utilizing the company’s capital. Put another way, it reveals the company’s success at turning shareholder investments into profits.
Check out our latest analysis for Shanghai Henlius Biotech
How Is ROE Calculated?
The formula for ROE is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
So, based on the above formula, the ROE for Shanghai Henlius Biotech is:
2.7% = CN¥55m ÷ CN¥2.1b (Based on the trailing twelve months to September 2023).
The ‘return’ is the amount earned after tax over the last twelve months. One way to…
