Return on equity (ROE) measures how much profit a company generates for every ringgit of shareholders’ equity, calculated as net income divided by average shareholders’ equity. It’s one of the standard ways to gauge how efficiently a company turns the capital shareholders have invested into profit.
For example, a company with RM50 million in net income and RM250 million in average shareholders’ equity has an ROE of 20% — for every ringgit of equity on the balance sheet, it generated 20 sen of profit that year.
ROE matters for screening because it separates companies that are genuinely productive with shareholder capital from those that simply look profitable in absolute terms. Two companies with the same net income can have very different ROEs if one requires far more equity to generate it — the one with the higher ROE is doing more with less. See how to use a stock screener for where a metric like ROE fits into a broader filtering process.