A good return on equity is generally 15 percent or higher, sustained over several years, but the source matters as much as the level. ROE driven by strong profit margins and efficient asset use is excellent, while ROE inflated by heavy debt is fragile and risky. Use a DuPont analysis to separate margin, asset turnover, and leverage. Roughly 15 to 20 percent from modest leverage is strong, below about 10 percent is weak, and above 20 percent is either elite (if debt-light) or a red flag (if debt-fueled). Always cross-check with ROIC, which is not distorted by leverage.

Benchmark

What is a good ROE?

A good return on equity is generally 15% or higher sustained over several years, but only after you check what drives it. ROE that comes from real operating quality is excellent; ROE manufactured with heavy debt is fragile. Use a DuPont breakdown to separate profit margin, asset turnover, and leverage. Roughly 15-20% from modest leverage is strong; below about 10% is weak.

Last reviewed: June 9, 2026

Short answer

15%+ is the rule of thumb, but always ask where the ROE comes from. A 25% ROE built on a mountain of debt is far weaker than an 18% ROE from fat margins and efficient assets. ROIC, which ignores leverage, is the honest cross-check.

What counts as a good ROE, by range

Below 10%: weak

Capital isn't working hard. Common in capital-intensive or low-margin businesses; rarely a compounder.

10-15%: decent

Solid, provided leverage is moderate. A respectable but not exceptional use of shareholder capital.

15-20%: strong

The quality zone: as long as debt isn't doing the heavy lifting. Verify with a DuPont breakdown.

Above 20%: excellent or leveraged

Elite if it's debt-light and durable; a warning if it's manufactured with leverage or buybacks.

Why you must look under the hood

Two companies both report 20 percent ROE. Company A: 10 percent net margin, decent asset turnover, almost no debt. Company B: thin margins, but it borrowed heavily so equity is tiny, leverage alone lifts the ratio to 20 percent.

DuPont analysis splits ROE into margin x turnover x leverage and exposes the difference instantly. Company A's return is durable; Company B's evaporates the moment earnings dip or rates rise. This is exactly why quality investors anchor on ROIC, which strips leverage out.

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What is ROE? - the full definition and why leverage can flatter it.
What is DuPont analysis? - ROE decomposed into margin, turnover, and leverage, where returns really come from.
What is ROIC? - the leverage-neutral quality gauge to cross-check ROE against.
What is the debt-to-equity ratio? - the first check on how much leverage is propping up a high ROE.

See ROE and ROIC side by side

invest-like reports ROE next to ROIC and a leverage check on every stock, so a debt-fueled ROE can't masquerade as quality.

Read the methodology What is ROE?

Educational only. invest-like is not a registered investment adviser; nothing here is personalised investment advice. Always do your own research and consider your individual circumstances.