![]() ![]() This shows that the company is committed to sharing profits with its shareholders. This certainly adds some context to Johnson & Johnson's moderate 12% net income growth seen over the past five years.īesides, Johnson & Johnson has been paying dividends for at least ten years or more. And on comparing with the industry, we found that the the average industry ROE is similar at 17%. To begin with, Johnson & Johnson seems to have a respectable ROE. Johnson & Johnson's Earnings Growth And 18% ROE Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. So far, we've learned that ROE is a measure of a company's profitability. What Has ROE Got To Do With Earnings Growth? Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.18 in profit. The 'return' is the amount earned after tax over the last twelve months. So, based on the above formula, the ROE for Johnson & Johnson is:ġ8% = US$13b ÷ US$71b (Based on the trailing twelve months to June 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 Johnson & Johnson How Is ROE Calculated? ![]() Put another way, it reveals the company's success at turning shareholder investments into profits. Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Particularly, we will be paying attention to Johnson & Johnson's ROE today. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. Most readers would already be aware that Johnson & Johnson's (NYSE:JNJ) stock increased significantly by 8.6% over the past week. ![]()
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