Profitability metrics explained
Places margins and capital returns. These metrics relate results achieved to revenue, assets or invested capital, among other bases. The score describes the financial data available and is not a forecast of future profits.
What is return on equity (ROE)?
Net income relative to equity. Changes in the capital structure move this figure too, so it should be read alongside the debt position. In the score it is ranked within the peer group rather than measured against a fixed threshold.
What is return on assets (ROA)?
Net income relative to total assets. This reads profitability against the whole asset base rather than against equity alone.
What is return on invested capital (ROIC)?
Operating profit (EBIT) after a flat 21 % tax, relative to invested capital. We take invested capital to be total assets minus current liabilities of the most recent financial year. The tax rate is deliberately flat — the company’s own effective rate does not enter. Where invested capital comes out at zero or below we report no value, and for banks and insurers the metric is not meaningful and is not computed. In the score it is ranked within the peer group.
What is the operating profit margin?
Operating profit relative to revenue. It shows what share of revenue is left after operating expenses and before financing and tax.
What is the net profit margin?
Net income relative to revenue. It shows what share of revenue remains as net income after operating expenses, financing, tax and other effects.
How the metrics become a score
How a metric is placed within its comparison group, and how the area scores and the metrics score are formed from it, is described in the methodology.