🧮 EL ROE Calculation
Understanding ROE
Return on Equity (ROE) measures how efficiently a company generates profits from shareholders' equity. For EL, the current ROE is 9.95%.
Why ROE Matters
Warren Buffett has called ROE one of his favorite metrics because it shows how well management uses shareholders' capital to generate returns. A company that consistently earns 15%+ ROE is typically a well-run business that creates value for shareholders.
High Leverage Warning
EL's debt-to-equity ratio of 2.07x is elevated. High ROE combined with high debt can be a red flag — the company may be using financial leverage to boost returns, which increases risk. Compare to ROIC for a more complete picture.
ROE Benchmarks
Excellent: >20%
Exceptional returns on equity. Often indicates strong competitive advantages. Common in capital-light businesses.
Good: 15-20%
Above-average ROE. Buffett often looks for companies in this range or higher.
Average: 10-15%
Typical for most companies. Returns are reasonable but not exceptional.
Below Average: <10%
May indicate poor capital allocation or challenging business conditions.
The DuPont Analysis
ROE can be decomposed into three components using DuPont analysis:
This breakdown reveals whether high ROE comes from high profitability (good), efficient asset use (good), or high leverage (potentially risky).
ROE vs ROIC: Which is Better?
ROIC: 7.99% →
ROIC measures returns on ALL capital. It's more comprehensive and less affected by leverage. Often considered the better quality metric.
ROE: 9.95%
ROE only measures returns on equity. Can be inflated by high debt. If ROE >> ROIC, the company uses significant leverage.
Owner Earnings: $1.3B →
Shows actual cash available to owners. Use alongside ROE and ROIC for complete analysis.
Net Income: $391.0M →
The numerator in ROE. Understanding net income trends helps explain ROE changes over time.
What to Look For
- Consistency: Stable or improving ROE over 5-10 years
- ROE vs ROIC gap: A large gap suggests high leverage — be cautious
- Debt levels: High ROE + High Debt = Higher risk
- Retained earnings: High ROE + high retention = compounding machine
📊 Full EL Stock Report →
Intrinsic value, margin of safety, DCF valuation, and 250+ metrics.
🏆 EL ROIC →
Compare ROE to ROIC — the more comprehensive measure of capital efficiency.
💹 EL P/E Ratio →
Analyze valuation relative to earnings and understand market pricing.
👤 EL Owner Earnings →
Warren Buffett's preferred measure of true economic earnings available to owners.
💰 EL Net Income →
See the earnings that drive ROE calculations.
💵 EL Free Cash Flow →
Actual cash generation after capital expenditures.
Summary: EL Return on Equity
Estee Lauder Companies Inc (EL) has a ROE of 9.95%, which Zyberno classifies as average for a Materials company — within the 7–10% range Zyberno considers typical for materials companies where cyclical pricing and capital requirements moderate returns. Note: with a debt-to-equity of 2.07x, leverage is amplifying these returns — compare with ROIC (7.99%) for a leverage-neutral view. For complete financial analysis, view the full EL stock report on Zyberno.
Frequently Asked Questions
What is EL's current ROE?
Estee Lauder Companies Inc's Return on Equity (ROE) is 9.95%, measured against the 15% excellent threshold Zyberno applies to Materials businesses. ROE measures the company's profitability relative to shareholders' equity.
Is EL's ROE good?
Estee Lauder Companies Inc (EL) has a ROE of 9.95%, which Zyberno classifies as average for a Materials company — within the 7–10% range Zyberno considers typical for materials companies where cyclical pricing and capital requirements moderate returns. Note: with a debt-to-equity of 2.07x, leverage is amplifying these returns — compare with ROIC (7.99%) for a leverage-neutral view.
What is the difference between ROE and ROIC?
ROE measures returns on shareholder equity only, while ROIC measures returns on all invested capital (debt + equity). EL's ROE is 9.95% vs ROIC of 7.99%. ROE can be inflated by high debt, making ROIC often a more reliable quality metric.
Can high ROE be misleading?
Yes, high ROE can be misleading if achieved through high debt. EL's debt-to-equity ratio is 2.07x. Compare ROE to ROIC — if ROE is much higher than ROIC, the company uses significant leverage which adds risk.
📊 Full EL Stock Report →
See EL's intrinsic value, margin of safety, DCF valuation, and complete financial analysis with 250+ metrics.
🏆 EL ROIC →
Compare to Return on Invested Capital — the most comprehensive measure of capital efficiency.
💹 EL P/E Ratio →
Analyze the price-to-earnings ratio and earnings yield as a valuation metric.
🎯 EL Earnings Surprise (SUE) →
See whether EL is beating or missing its own earnings trend — Standardized Unexpected Earnings and post-earnings drift.
👤 EL Owner Earnings →
Warren Buffett's preferred measure of true economic earnings available to owners.
💰 EL Net Income →
See the bottom-line profit that drives return calculations.
📊 EL EPS →
Earnings per share — net income on a per-share basis.