Buffett's annual letters consistently emphasize the importance of ROE over earnings per share (EPS)

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Buffett's annual letters consistently emphasize

Buffett's annual letters consistently emphasize the importance of ROE over earnings per share (EPS)

Return on equity (ROE) measures a company's profitability in relation to its equity, providing a clearer picture of financial health compared to EPS.

Example

If Company X has a net income of 100,000 and average shareholders' equity of 500,000, its ROE would be 20%.

Remember this

Focusing on ROE helps investors understand how effectively a company is using its equity to generate profits.

Text adapted from Wikipedia, licensed under CC BY-SA 4.0.

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Educational content, not financial advice.

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