您现在的位置是:Knowledge >>正文
【case in verilog】A Note On DTE Energy Company's (NYSE:DTE) ROE and Debt To Equity
Knowledge94人已围观
简介Many investors are still learning about the various metrics that can be useful when analysing a stoc ...
Many investors are still learning about the various metrics that can be useful when analysing a stock. This case in verilogarticle is for those who would like to learn about Return On Equity (ROE). To keep the lesson grounded in practicality, we'll use ROE to better understand DTE Energy Company (
NYSE:DTE
).
Our data shows
DTE Energy has a return on equity of 10%
for the last year. Another way to think of that is that for every $1 worth of equity in the company, it was able to earn $0.10.
View our latest analysis for DTE Energy
How Do You Calculate ROE?
The
formula for return on equity
is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
Or for DTE Energy:
10% = US$1.1b ÷ US$11b (Based on the trailing twelve months to September 2019.)
Most know that net profit is the total earnings after all expenses, but the concept of shareholders' equity is a little more complicated. It is the capital paid in by shareholders, plus any retained earnings. The easiest way to calculate shareholders' equity is to subtract the company's total liabilities from the total assets.
What Does Return On Equity Signify?
ROE measures a company's profitability against the profit it retains, and any outside investments. The 'return' is the yearly profit. The higher the ROE, the more profit the company is making. So, as a general rule,
a high ROE is a good thing
. That means it can be interesting to compare the ROE of different companies.
Does DTE Energy Have A Good Return On Equity?
By comparing a company's ROE with its industry average, we can get a quick measure of how good it is. Importantly, this is far from a perfect measure, because companies differ significantly within the same industry classification. If you look at the image below, you can see DTE Energy has a similar ROE to the average in the Integrated Utilities industry classification (10%).
NYSE:DTE Past Revenue and Net Income, January 1st 2020
That's not overly surprising. ROE can give us a view about company quality, but many investors also look to other factors, such as whether there are insiders buying shares. If you like to buy stocks alongside management, then you might just love this
free
list of companies. (Hint: insiders have been buying them).
Why You Should Consider Debt When Looking At ROE
Virtually all companies need money to invest in the business, to grow profits. That cash can come from issuing shares, retained earnings, or debt. In the case of the first and second options, the ROE will reflect this use of cash, for growth. In the latter case, the debt used for growth will improve returns, but won't affect the total equity. That will make the ROE look better than if no debt was used.
Story continues
DTE Energy's Debt And Its 10% ROE
DTE Energy clearly uses a significant amount of debt to boost returns, as it has a debt to equity ratio of 1.45. There's no doubt the ROE is respectable, but it's worth keeping in mind that metric is elevated by the use of debt. Debt increases risk and reduces options for the company in the future, so you generally want to see some good returns from using it.
The Key Takeaway
Return on equity is one way we can compare the business quality of different companies. A company that can achieve a high return on equity without debt could be considered a high quality business. If two companies have the same ROE, then I would generally prefer the one with less debt.
But ROE is just one piece of a bigger puzzle, since high quality businesses often trade on high multiples of earnings. Profit growth rates, versus the expectations reflected in the price of the stock, are a particularly important to consider. So I think it may be worth checking this
free
report on analyst forecasts for the company
.
Of course
DTE Energy may not be the best stock to buy
. So you may wish to see this
free
collection of other companies that have high ROE and low debt.
If you spot an error that warrants correction, please contact the editor at
. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
View comments
Tags:
相关文章
Robin.io Expands Leadership Team and Advisory Board for 5G Market
KnowledgeSteve Papa of Parallel Wireless among additions to advisory boardSAN JOSE, Calif., June 05, 2020 (GL ...
阅读更多Amazon's (AMZN) Latest ML Services Boost Its AWS Portfolio
KnowledgeAmazonAMZN is making strong efforts toward capitalizing on the growing demand for Machine Learning ( ...
阅读更多Has TerraForm Power (TERP) Outpaced Other Utilities Stocks This Year?
KnowledgeInvestors focused on the Utilities space have likely heard of TerraForm Power (TERP), but is the sto ...
阅读更多
热门文章
- US Test Preparation Market 2020-2024 - Increasing Use of Analytical Tools and Emphasis of Online Test Preparation Modes Driving Market Demand
- Is Ivy Small Cap Growth Y (WSCYX) a Strong Mutual Fund Pick Right Now?
- Recap: eXp World Holdings Q1 Earnings
- Calculating The Fair Value Of Asanko Gold Inc. (TSE:AKG)
- Warren Buffett: Know When to Cut Your Losses
- X-ray Tube Market - Growth, Trends, Forecasts (2020 - 2025)
最新文章
-
As Currency Values Deflate, Gold Sees Bright Horizon
-
John B. Sanfilippo & Son, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions
-
Donald Trump vows 'major' steps to aid US economy amid coronavirus rise
-
Delivery Hero takes steps to support struggling restaurants
-
Is There Now An Opportunity In Sotherly Hotels Inc. (NASDAQ:SOHO)?
-
INSIGHT-The religious retreat that sparked India's major coronavirus manhunt
友情链接
- Why CF Industries Holdings, Inc. (NYSE:CF) Is A Dividend Rockstar
- Romney attacks Trump, saying he causes dismay around the world
- This chart shows how the cost of cable has exploded over time
- GLOBAL ECONOMY-U.S.-China trade war takes toll on global manufacturing
- Intel Rises 3%
- What does Quantum Thinking Limited’s (HKG:8050) Balance Sheet Tell Us About Its Future?
- Need To Know: DNB Financial Corporation (NASDAQ:DNBF) Insiders Have Been Selling Shares
- BRIEF-Shanxi Changcheng Microlight Equipment Received A RMB20 Mln Subsidy From ITU Fund
- Cee Lo Holds Court at Primary Wave Pre-Grammy Party, Larry Mestel Calls RoccStar, Trevor Jackson ‘The Future’
- Nick Cannon Calls ‘Red Table Talk’ The “Toxic Table” After Cancellation & Says Facebook Watch Show Led To Infamous Oscar Slap