What is Return on Equity (ROE)?

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[@GhanYt]

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[@bahijarhafiri]

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[@bahijarhafiri]

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[@Discovery_and_Change]

0:52 The Return on Equity (ROE) is a measure of how efficient a company is in producing a profit for shareholders 1:37 The net value of a company (its equity) is what's left over after subtracting liabilities from assets 2:10 ROE is the net profit divided by the equity

[@kamilkacprzak2306]

This is so clearly and logically explained ! Perfect.

[@learnwithstanley]

Thanks

[@pkn8994]

Great explanation Stanley. Your examples are very clear and easy to comprehend. I also appreciate that you did not make this explanation excessively long. New subscriber earned! :)

[@learnwithstanley]

Wow. Thank you for your kind words! Will continue to make more content for u

[@mezamax93]

Best explanation on ROE I've seen. Thanks for the upload!

[@devbalaji3089]

Thanks for the video and good explanation of the concept. It would be great if you can make short videos on various financial ratios like ROIC, ROCE etc.

[@saadehmarsel]

Funny that P&Ds that all matter these day ,, hedges move markets, retail gets buried let's be real ! great video btw ! don't let my realism bring you down, I actually learned plenty from you ! thank's mate !

[@learnwithstanley]

Thank you so much! Truly

[@yogeshsabnis8507]

Thank you Stanley for a clear explanation. I appreciate your videos and you now have a new subscriber. From what I understand, would laying off employees help to raise the ROE for a company? Thanks

[@learnwithstanley]

Hi. Generally speaking, it could be just a short term boost, as maybe after cutting the staff, the revenue drop is delay, so for this year, the revenue is still good but cost is lower, so profit can have a sudden boost. But that is not sustainable as next year, the company will suffer

[@erikhoryza9068]

Made this concept click really fast. Thank you for this.

[@WherelsWally]

Hi Stanley, I am finding it hard to understand why higher ROE is better. Suppose you have 2 companies - Company A and Company B Company A has $100k in Assets and $90K in Liability (meaning $10k in Equity). Company B has $100k in Assets and no Liability (meaning $100k in Equity). Suppose both companies earn $10k in a year. Company A ROE - 100% Company B ROE - 10% Isn't Company B a better company to invest in? Essentially both companies have the same ROA (which is 10%), meaning that both companies are making use of their assets efficiently. But Company B has no liabilities, so why would you invest in Company A that has more liabilities? Correct me if I'm wrong, but I find ROA to be more representative of how "efficient" a company is. I don't quite see why you would use an ROE instead of ROA in any scenario. Would appreciate it if I could get your thoughts on this.

[@learnwithstanley]

Hi you are right ROE is not inherently "better". But it should be use together with other ratios to tell us more information about the company. So as u suggested, we should use it together with understand the leverage or margins of the business. To give us a better picture. Then we can decide if we prefer to invest in a stock that is growing faster but has a higher leverage. Or we want to be safer and stick with one with better balance sheet

[@deddywirata3719]

Thank you for sharing! Very well explained..

[@andherium]

Beware ! A company can have a high liability decreasing it's equity which inturn will increase the ROE. So higher ROE by itself says nothing about the company.

[@kokteonggan7499]

Indeed! Every video produce by you, a masterpiece. So clearly explained and any layman can easily understand.

[@learnwithstanley]

Thanks for the high praise

[@yoyoong9073]

i have been repeatedly watching my lecturer's recording video but i still couldnt clearly get the meaning of ROE. But this video just save me from struggling. Thanks!

[@learnwithstanley]

Glad it helped!

[@mikuronightray5902]

Thank you! I didn't know how important it was until I watched this video. :)

[@learnwithstanley]

Glad it helped

[@saifialig]

How can we correlate roe with PE ratio?Any straight formula for it? For example a company with high roe and high PE ratio, how can we know if company is expensive?

[@learnwithstanley]

To feel a company is over or under valued is quite subjective. So it is more of a personal opinion. I tend to compare it's PE to it's historical PE. And company with high ROE should deserve a higher PE as well

[@JHP-z]

Fantastic, thanks very much

[@learnwithstanley]

Thanks

[@Inspiripreneur]

Thank you Stanley!!

[@learnwithstanley]

Glad it helped u

[@chrisolga3]

I am a W2 employee trying to learn financial literacy. Thank you. Namaste.

[@JesseFragale]

Great video.. What type of cam and lens?

[@learnwithstanley]

Thanks. Using a Sony a6400. Just standard lens with some color correction

[@mididoddi]

Great job buddy!

[@moonbasealpha2251]

Does the shareholders equity change if a company had its asset revalued? For example, the equipment is old and gets its value reduced compared to the original purchasing cost. Does their ROE go up?

[@leophysics]

Does the company pay Roe to investors? As dividend or something else

[@jairzuniga9597]

Learned a lot from this video , thank you and keep up the good content!

[@sursumcordahelvetia]

Thanks for the video, was very clear

[@MarigoldAlien]

Very clear. Thank you very much.

[@learnwithstanley]

Welcome 😊

[@bengkeong2001]

Hi Stanley,may i know how you get 3.6% ROE for Sembcorp in this video?I calcuculated but only got 2.78%.Thanks.

[@learnwithstanley]

Hi AT, thanks for the question. You are right. For the example, the ROE of the whole company is indeed 2.78%. However, because SembCorp Industry has a large minority interest in the business, if we only include the ROE for shareholders, the figure will be 3.6%, which is a number we get from Morningstar. Minority interests might be a topic we cover in future videos. I am sorry, we should have make it clearer. But for the simplicity of the example, we are just highlighting it has a low ROE.

[@bengkeong2001]

@@learnwithstanley i see.Thank you for the explanation.Looking forward to learn more from your videos.Thanks

[@moonbasealpha2251]

What if a company took out a loan to pay dividends to stock holders. Wouldn't that decrease equity and therefore increase ROE?

[@revanhorsten22]

Thanks!!

[@yosmuc]

Thanks a lot, very clear ! :)

[@learnwithstanley]

thank you

[@nicolasfarah2092]

Best explanation so far.

[@미국자매]

Oh my gosh I finally understand! Thank you so much!

[@omaralamro5092]

thanks

[@drsnazzy]

do you have a rough gauge of good different ROE ratios by industry?

[@learnwithstanley]

Hi, the range depends greatly on the geographic and also industry of the company. So it is hard to give a fixed range across all industries. One way you can compare is by going to Morningstar and looking at the company's ROE comparing it with some of its other direct competitors, so you can see how it is doing compare to its peers. For example, if we are looking at the banking sector in Singapore, we can look at the ROE of all the three banks in Singapore, to see which one has a better ROE.

[@drsnazzy]

@@learnwithstanley Do you recommend subscribing to Morningstar premium for someone new to investing? or will the free one suffice

[@chiragesrani]

Why ROE of McDonald and Starbucks is negative

[@leestringer]

The quick edit from your human face to the alien being that is Zuckerberg was a bit jarring, but otherwise, great video. lol Thanks.

[@learnwithstanley]

Lol

[@nadeemmakrani6565]

can person outside singapore invest in singapore stock market? thank you

[@learnwithstanley]

Yes you can!

[@nadeemmakrani6565]

@@learnwithstanley can you guide me how?

[@okok-yh8tt]

Ideal video

[@andrewleong8643]

Lovely video and a great teacher - subscribed.

[@learnwithstanley]

Thank u

[@TunkPotterSV]

Great explanation, thanks bro!

[@learnwithstanley]

Thanks!

[@Belisiario]

Valeu, mano.

[@lucylightning4715]

great explanation; thanks so much!!

[@subhankarjana2987]

Sir I'm from India🇮🇳 your explanation is so clear

[@learnwithstanley]

Hello. Thank you for watching

[@david-wj1et]

in the first example why would the company owe 900,000 instead of 1,000,000?

[@learnwithstanley]

because the example is only lending 90% of the asset

[@david-wj1et]

@@learnwithstanley then whats the other 10% is that the equity?

[@RajendraPanwar86]

great explanation with proper example :)

[@the_freedom_quest]

best explanation, thanks!

[@learnwithstanley]

Thank you

[@yayaksofyan]

Good explanations..

[@theyreeatingthedoggs]

So helpful! Thank you, good sir.

[@learnwithstanley]

Thanks

[@jiffryiqbal7813]

Guys i m getting an ROE of 2.7848% for that Singapore company.

[@jiffryiqbal7813]

But you say its 3.6%. Sorry I can't understand

[@abuabdullah9878]

@@jiffryiqbal7813 I have the same question. Perhaps his numbers were just off?

[@thomassinaguglia9320]

Excellent video.

[@learnwithstanley]

Thank you very much!

[@dksingh3248]

Nice information given by you Thanks

[@learnwithstanley]

Thanks

[@hcp0scratch]

TY!!!

[@Mierlok]

Thanks for that 🇸🇦🌹

[@lowg9754]

New sub here. thank for a good and clear explanation regarding ROE. more power! cheers all the way from PH :)

[@learnwithstanley]

Thanks for the sub! Many more videos coming your way every week!

[@Ħæïķăł]

This have nothing to do with pakatan harapan

[@adarshr3790]

Can you explain PE ratio? Please😪

[@learnwithstanley]

We do have that explanation kzbin.info/www/bejne/roHHq2dseNmbepo

[@stevenloh33]

When the ROE is negative, mean?

[@learnwithstanley]

It means the company is making a loss. The earnings is negative.

[@aashutoshtiwari9689]

20000/100000 =0.2 can u explain..

[@takeoverusa]

Love to my Asian bro.

[@galaxyone3524]

Hi Stanley..

[@learnwithstanley]

Hi :)

[@rinsim]

Borrowing more money doesn't make you richer.

[@KritikX]

Okay. I read all books buffet recommended. and i found the formula for the intrinsic value of a formula. it isnt in form of formula but it is in form of a sentence that you have to build a formula from. so: if someone is interested i sell it for a very high price. i think that most of you wont be able to find this formula which btw is very simple but tricky. if no one is interested in this formula i am satisfied with it and make my money on my own with stocks. when i am and old man (i hope i reach this age) i will write a little paper with the formula and will look if i share it with all or special people. btw: i also think that capitalism is an illusion, wrong and only a big instrument for all small class of rich disbelievers to control humans so that they can hold power and honor their own egos

[@TundraXD]

I wouldn’t accept your formula even if you paid me