Probably as a result of this, Abbott Laboratories was able to see an impressive net income growth of 34% over the last five years. Especially when compared to the industry average of 9.8% the company's ROE looks pretty impressive. Abbott Laboratories' Earnings Growth And 16% ROEĪt first glance, Abbott Laboratories seems to have a decent ROE. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.
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. We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. Why Is ROE Important For Earnings Growth? That means that for every $1 worth of shareholders' equity, the company generated $0.16 in profit. The 'return' is the amount earned after tax over the last twelve months. So, based on the above formula, the ROE for Abbott Laboratories is:ġ6% = US$5.8b ÷ US$37b (Based on the trailing twelve months to March 2023). Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
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See our latest analysis for Abbott Laboratories 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 an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In this article, we decided to focus on Abbott Laboratories' ROE. But if you pay close attention, you might gather that its strong financials could mean that the stock could potentially see an increase in value in the long-term, given how markets usually reward companies with good financial health. With its stock down 7.6% over the past month, it is easy to disregard Abbott Laboratories (NYSE:ABT).
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