No. of Recommendations: 12
I would caution anyone ever using returns on equity of any sort to understand this simply statistic is often meaningless. It is meaningless for multitudes of reasons...
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Of course Jim, my point isn't a conclusion. It is the introduction of what you finished...
Your first two sentences assume something I didn't state.
Sorry if I misconstrued your post, obviously not my intent.
I perhaps hastily took the post to be mainly dismissing the entire concept of using ROE as being "meaningless", a stance I would not endorse.
An ROE figure can sometimes mislead if something big and odd has happened to the net worth on the balance sheet, but that's actually pretty rare.
With those few exceptions, firms with consistently high ROE generally fall into one of two very simple categories: either good businesses, or over leveraged ones.
Occasionally both : )
Jim
