A Daily List of Stocks Sorted by Return on Equity

Return on equity (ROE) measures how efficiently a company turns shareholder capital into profit. It is calculated by dividing net income by shareholders’ equity, and expressed as a percentage. A figure of 30%, for example, means that every €10,000 of equity generates a €3,000 net profit.

MarketScreener has published a daily-updated list that ranks companies by ROE, from highest to lowest, as part of its investment style screening tools. The list, which is refreshed algorithmically, aims to capture the cohort of firms that historically have delivered market-beating returns over extended periods.

The logic behind the screen is supported by extensive academic and financial research. A Credit Suisse study covering 1965 to 2015 found that the top quintile of stocks by ROE outperformed the bottom quintile by an average of 17% per year. Similar results have been replicated across US, European, Taiwanese, and Indian markets over multi-decade horizons.

The Track Record and Limits of ROE as a Stock Picking Tool

ROE is prized because it zeroes in on the profitability of the equity stake alone, ignoring borrowed money. In theory, a high and stable ROE signals a strong competitive advantage and disciplined capital allocation—qualities that tend to compound over time. The studies cited, including Greenwald et al. (2010) and multiple regional analyses, consistently show that the top-ROE stocks outperform their benchmarks over the long run.

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The Debt Leverage Trap

A crucial caveat is that ROE can be artificially inflated by high leverage. When a company takes on substantial debt, its equity base shrinks relative to total capital, mechanically boosting ROE even if underlying profitability is unchanged. That is why analysts often pair ROE with return on capital employed (ROCE), which accounts for all financing sources, and scrutinise the balance sheet for excessive borrowing.

Why Past Performance Isn’t a Guarantee

While the historical outperformance of high-ROE baskets is striking, the article itself stresses that past returns do not predict future results. Market conditions, sector rotations, and changes in a firm’s competitive moat can erode the relationship. The screening list is a starting point for further due diligence, not a stand-alone buy signal.