ROE shows how much profit a company makes from its owners' money (the equity). 20 % means: €100 of equity produces €20 of profit per year.
Rule of thumb:
MoatLens tip: Over many years your return approaches the ROE the business earns – a company that can keep reinvesting its profits at 20 % makes your money grow like compound interest. But look at the debt: a high ROE can also come simply from lots of borrowed money (for banks that's normal anyway). Best is a high ROE together with low debt – and stable over many years.
Return on Equity (ROE) shows how much profit a company generates with the money shareholders have invested.
Why does this matter?
Imagine you give a company 100 euros. ROE shows you how much profit that company earns per year with your 100 euros. A high ROE means: management uses shareholders' capital efficiently.
What counts as good?
MoatLens perspective: Experienced value investors favor companies that consistently achieve a high ROE over many years — not just in one good year. Consistency matters more here than a single peak value.
What to watch for: A very high ROE can also result from high debt (the company borrows money to work with). So always look at ROE together with debt.
In MoatLens this explanation sits right next to the number — one tap away. And you see the ten-year trend instead of a single value.
