Return on Equity Electra Real Estate Ltd. (TLV: ELCRE) 27% better than average?

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Many investors are still researching various metrics that can be useful when analyzing stocks. This article is for those looking to learn about return on equity (ROE). For a practical lesson, we will use ROE to better understand Electra Real Estate Ltd. (TLV: ELCRE).

Return on equity, or ROE, is a test of how effectively a company increases its value and manages investor money. In short, ROE shows the return that every dollar brings in relation to the investments of its shareholders.

Check out our latest analysis on Electra Real Estate

How do you calculate your return on equity?

The return on equity can be calculated using the formula:

Return on equity = net income (from continuing operations) ÷ equity capital

So, based on the above formula, the ROE for Electra Real Estate is:

27% = 129 million ÷ 468 million (in the last 12 months until March 2021).

“Profitability” is the income earned by the business over the past year. Another way to think about this is that for every pound of net worth, the company could have earned £ 0.27 in profit.

Does Electra Real Estate have a good return on equity?

By comparing a company’s return on equity to the industry average, we can quickly gauge how good it is. However, this method is only useful as a rough check, as companies do vary widely within the same industry classification. As you can see in the graph below, Electra Real Estate has a higher return on equity than the real estate industry average (8.9%).

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TASE: ELCRE ROE June 14, 2021

This is a good sign. Remember that a high return on equity does not always mean excellent financial performance. Especially when a firm uses high levels of debt to fund its debt, which can increase its return on equity, but high leverage puts the company at risk. You can see the 2 risks we have identified for Electra Real Estate by visiting our risk dashboard is free on our platform here.

The Importance of Debt for Return on Equity

Almost all companies need money to invest in business and increase profits. This cash can come from retained earnings, the issuance of new shares (capital), or borrowed funds. In the first two cases, ROE will reflect this use of capital for growth. In the latter case, the debt used for growth will increase profitability but will not affect total capital. Thus, leveraging debt will increase the return on equity, even if the underlying business economics remains the same.

The combination of Electra Real Estate debt and its 27% ROE

Electra Real Estate uses a large amount of debt to increase profits. The debt to equity ratio is 1.17. Its return on equity is pretty impressive, but it would probably be lower without using debt. Debt does come with added risk, so it only really makes sense when the company is making a decent profit from it.

Conclusion

Return on equity is a useful indicator of a business’s ability to generate returns and return them to shareholders. A company that can achieve high return on equity without leverage can be considered a high-profile business. All things being equal, the higher the ROE, the better.

But when the business is high quality, the market often offers a price that reflects this. It is important to consider other factors, such as future profit growth and the amount of investment required in the future. So I think it’s worth checking this out is free this is detailed schedule past income, income and cash flows

If you’d rather check out another company – with potentially superior financial performance – don’t miss this. is free a list of interesting companies with HIGH ROE and low debt.

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