High ROE Stocks

ROE (Return on Equity) measures profit generated per dollar of shareholder equity. Generally: 15-20% is good, 20%+ is excellent, and consistent ROE above 15% over multiple years signals quality. The S&P 500 averages around 13-15%. However, context matters: Very high ROE (40%+) may result from excessive debt (which amplifies returns but adds risk) or negative equity (accumulated losses). Compare ROE to peers in the same industry. This screen uses 30% as the minimum threshold to surface companies generating genuinely strong returns on capital.

ROE equals Net Income divided by Shareholder Equity. When companies take on debt, they can generate more profits without additional equity investment, inflating ROE. Consider two identical businesses: Company A uses no debt (100% equity-funded) with 15% ROE; Company B uses 50% debt and 50% equity, potentially showing 30%+ ROE on the same business. The DuPont analysis breaks ROE into components: profit margin × asset turnover × financial leverage. Check the Financial Health Score alongside ROE. This screen requires minimum 3/5 Stock Score to filter out companies achieving high ROE primarily through dangerous leverage.

Warren Buffett has long prioritized ROE as a quality indicator, seeking companies with 'consistently high returns on equity.' High ROE businesses can compound shareholder wealth internally, reinvesting earnings at attractive rates rather than requiring constant capital infusions. A company earning 30% ROE and retaining earnings theoretically grows book value 30% annually without shareholder dilution. Buffett also looks for sustainable competitive advantages ('moats') that protect high ROE from competition. This screen identifies high-ROE companies; combining with other Stock Scores helps assess whether returns are sustainable.

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Stock Scores are our proprietary 1-5 ratings across seven dimensions: Valuation, Growth, Profitability, Financial Health, Dividends, Management, and Analyst sentiment. Unlike one-size-fits-all systems that treat banks, tech stocks, and REITs the same way, our algorithms are calibrated per industry using metrics specific to each business type. Scores update in real-time as prices change and when new financial data arrives. Green (4-5) indicates strength, yellow (3) is neutral, red (1-2) signals caution. They're not trading signals; they help you quickly assess fundamental health across 100,000+ stocks. Learn more about Stock Scores →

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