To begin with, Anthem seems to have a respectable ROE. A Side By Side comparison of Anthem's Earnings Growth And 17% ROE Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.
Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. Thus far, we have learned that ROE measures how efficiently a company is generating its profits. What Is The Relationship Between ROE And Earnings Growth? That means that for every $1 worth of shareholders' equity, the company generated $0.17 in profit. The 'return' is the income the business earned over the last year. So, based on the above formula, the ROE for Anthem is:ġ7% = US$6.2b ÷ US$36b (Based on the trailing twelve months to March 2022). Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity In simpler terms, it measures the profitability of a company in relation to shareholder's equity.Ĭheck out our latest analysis for Anthem How Do You Calculate Return On Equity?
ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In this article, we decided to focus on Anthem's ROE. But if you pay close attention, you might gather that its strong financials could mean that the stock could potentially see an increase in value in the long-term, given how markets usually reward companies with good financial health. It is hard to get excited after looking at Anthem's (NYSE:ANTM) recent performance, when its stock has declined 6.5% over the past month.
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