Ways to Use Return on Equity to Uncover Investment Opportunities

9

How to use return on equity to uncover investment opportunities

Return on equity is another important way to analyse a stock.

The ‘equity’ of a business is how much money investors have collectively put into a business.

Companies that have a high return on this figure are the most valuable to own, usually. 

You can think about this with your own savings.

Imagine you have $20,000. Would you want it in a bank account that pays 1% or 10%?

Obviously, you want the highest return for your money.

That’s what good companies are able to do. They take money from investors and generate a very high return from it.

You might want to consider companies that have a competitive strength. Something like a government license, a great brand or brilliant management.

One warning: companies can use debt to boost their ‘return on equity’ number. So be careful.

Again, no one metric is the answer.
Filters are simply a way to find a list of ideas to investigate further.

Now let’s look at where profitability factors in…

Cheers,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch

The Great Mining Collision

A huge ‘technological convergence’ is revolutionising mining operations all over the world. And a few key Australia-listed mining giants are playing a key role. Free report explains all. Plus, get a free subscription to Australia’s newest, most forward-looking daily investment email, Profit Watch. Enter your email address below and click ‘Send Me My FREE Report’.

We will collect and handle your personal information in accordance with our Privacy Policy. You can cancel your subscription at any time. Read our FAQ