Return on assets (ROA)
Profit earned for every unit of everything the company owns.
It is the return before any question of how the assets were financed, so it is harder to flatter than return on equity.
How it is computed here
Net income / total assets x 100
Combines more than one basis. See the note. The pipeline prefers the data vendor's published trailing-twelve-month ratio when one exists, and falls back to recomputing from the latest filed fiscal year when it does not. Those two are different measurements: the vendor figure puts twelve months of flow over the most recent quarterly balance sheet. The source trail on each figure names which path produced it. Filed under quality. Higher is the stronger reading, other things equal.
The readings, and where the lines come from
| Range | Reading |
|---|---|
| below 2.0% | Thin |
| 2.0% to 5.0% | Ordinary |
| 5.0% to 10.0% | Strong |
| 10.0% and above | Exceptional |
A practitioners’ convention, not an estimated boundary. Convention rather than an estimated boundary; asset intensity differs so widely that the peer percentile is the stronger reading.
When it misleads
- Asset-light and asset-heavy businesses are not comparable here at all. A software company and a steel mill are on different scales.
- A bank holds enormous assets against deposits, so its return on assets is structurally around one percent and means something else entirely.
Reads differently for banks, insurers: the figure is shown with that caveat attached.
Questions
How is return on assets calculated?
Net income / total assets x 100. Combines more than one basis. See the note. The pipeline prefers the data vendor's published trailing-twelve-month ratio when one exists, and falls back to recomputing from the latest filed fiscal year when it does not. Those two are different measurements: the vendor figure puts twelve months of flow over the most recent quarterly balance sheet. The source trail on each figure names which path produced it.
What does return on assets tell a value investor?
It is the return before any question of how the assets were financed, so it is harder to flatter than return on equity.
When does return on assets mislead?
Asset-light and asset-heavy businesses are not comparable here at all. A software company and a steel mill are on different scales. A bank holds enormous assets against deposits, so its return on assets is structurally around one percent and means something else entirely.