It is important to consider other factors, such as future profit growth - and how much investment is required going forward. If two companies have around the same level of debt to equity, and one has a higher ROE, I'd generally prefer the one with higher ROE.īut when a business is high quality, the market often bids it up to a price that reflects this. In our books, the highest quality companies have high return on equity, despite low debt. Return on equity is one way we can compare its business quality of different companies. Pleasingly, Gilead Sciences has a superior ROE than the average (21%) in the Biotechs industry. However, this method is only useful as a rough check, because companies do differ quite a bit within the same industry classification.

Does Gilead Sciences Have A Good Return On Equity?īy comparing a company's ROE with its industry average, we can get a quick measure of how good it is. Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.26 in profit. The 'return' refers to a company's earnings over the last year. So, based on the above formula, the ROE for Gilead Sciences is:Ģ6% = US$5.5b ÷ US$21b (Based on the trailing twelve months to March 2023). Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

Return on equity can be calculated by using the formula: View our latest analysis for Gilead Sciences How To Calculate Return On Equity? In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders. Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. By way of learning-by-doing, we'll look at ROE to gain a better understanding of Gilead Sciences, Inc. While some investors are already well versed in financial metrics (hat tip), this article is for those who would like to learn about Return On Equity (ROE) and why it is important.

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