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). We’ll use ROE to examine United Parcel Service, Inc. (NYSE:UPS), by way of a worked example.
Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.
View our latest analysis for United Parcel Service
How To Calculate Return On Equity?
The formula for ROE is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
So, based on the above formula, the ROE for United Parcel Service is:
34% = US$5.7b ÷ US$17b (Based on the trailing twelve months to September 2024).
The ‘return’ refers to a company’s earnings over the last year. That means that for every $1 worth of…
