Many investors are still learning about the various metrics that can be useful when analysing a stock. This article is for those who would like to learn about Return On Equity (ROE). By way of learning-by-doing, we’ll look at ROE to gain a better understanding of PG&E Corporation (NYSE:PCG).
Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In simpler terms, it measures the profitability of a company in relation to shareholder’s equity.
See our latest analysis for PG&E
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 PG&E is:
9.3% = US$2.4b ÷ US$26b (Based on the trailing twelve months to March 2024).
The ‘return’ refers to a company’s earnings over the last year. One way to conceptualize this is that for each $1…
