QualityFin Lev#50
ROE Stability is the metric used to how efficiently a company converts capital into earnings.
By Javier Sanz, Founder & Lead AnalystEditorially reviewed
Last updated: Reviewed by: Javier Sanz
Formula
Total Assets / Shareholders' Equity
Description
Measures the degree to which a company uses debt and other liabilities to finance its assets. This is one of the three components of the DuPont decomposition of ROE (margin x turnover x leverage). High leverage boosts ROE but increases risk.
Interpretation
Below 2.5 is moderate. Above 3.0 is aggressive for non-financial companies. Compare to ROE: if a company has high ROE but also high financial leverage, the profitability may be less sustainable than it appears.
Related metrics: Return on Equity (ROE), Return on Assets (ROA), Return on Invested Capital (ROIC). (Updated 2026)
Further Reading
- SEC EDGAR primary filings on ROE Stability- Primary source filings used to calculate ROE Stability.
FAQ
How is ROE Stability calculated?+
ROE Stability uses the formula: Total Assets / Shareholders' Equity. compare against sector median on /screener with the Sector filter applied. ValueMarkers refreshes the calculation within 24 hours of each new SEC filing using SEC EDGAR 10-K + 10-Q filings (segment-level disclosures).
What is a good ROE Stability value by sector?+
There is no single 'good' value for ROE Stability — context is sector-driven. compare against sector median on /screener with the Sector filter applied. The /screener exposes sector-relative percentiles for ROE Stability on every ticker, so you can compare against the sector median rather than the broad-market median.
Which investors use ROE Stability?+
Charlie Munger, Joel Greenblatt, Terry Smith cite ROE Stability as a key input to to find compounders with durable economic moats. The academic anchor is Greenblatt (2005) Magic Formula and Mauboussin (2014). ValueMarkers weights this within the Quality pillar of the VMCI score (30% of total).
What are the limitations of ROE Stability?+
ROE Stability can mislead in asset-light businesses where conventional capital ratios mislead. Pair ROE Stability with at least two cross-checks from other VMCI pillars — for example, free cash flow trend, balance-sheet quality, and earnings consistency — before drawing a single-metric conclusion.
Where can I see live ROE Stability data?+
Visit any /stock/[ticker] page on ValueMarkers to see live ROE Stability data, sector percentiles, and the VMCI composite score that integrates ROE Stability with 119 other indicators across 100,000+ stocks. The free /screener exposes ROE Stability as a filterable column.
Related Quality Indicators
Return on Equity (ROE)Op Margin
Return on Equity measures how efficiently a company converts capital into earnings.
Return on Assets (ROA)Net Margin
Return on Assets is the metric used to how efficiently a company converts capital into earnings.
Return on Invested Capital (ROIC)EBITDA Margin
Return on Invested Capital measures how efficiently a company converts capital into earnings.
Return on Capital Employed (ROCE)FCF Margin
Return on Capital Employed is the metric used to how efficiently a company converts capital into earnings.
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