Return on equity of the company
Investors are often interested in such an indicator as return on equity of a company, which measures how well a company fulfills its obligations to shareholders. This ratio shows how much a company earns from the resources provided by its shareholders. Investors prefer companies with high ROEs that show signs of growth. Profit on equity of the company can be calculated by the following formula:
Return on equity = Income after taxes Share capital
The ROE for Note Company Depot is 19.27%, and the corresponding figure for Lowe ’is 20.22%.
Despite the higher ROA from Note Depot, a comparison of the ROE of these two companies shows that Lowe’s more successfully fulfills its obligations to shareholders, which is reflected in the price that investors are willing to pay for the shares of this company.
When deciding whether to buy or sell shares of certain companies,Of course, you can not use the results of fundamental analysis, but the inclusion of these results in your arsenal will certainly help you make smarter decisions regarding the purchase / sale of shares. Knowing that the company whose shares you decide to buy demonstrates quite attractive fundamental indicators will only reinforce the results of your technical analysis, which will be discussed in part of this book. If you choose between two blocks of shares, which are characterized by positive technical diagrams, you can use the fundamental analysis to make the final choice in favor of a company that demonstrates more attractive fundamentals.
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