How Does Rogers Communications Inc.'s (TSE:RCI.B) 17% ROE Compare to the Industry Average?

2 min read | February 03, 2025 03:21 AM EST | By Team Kalkine Media

How Does Rogers Communications Inc.'s (TSE:RCI.B) 17% ROE Compare to the Industry Average? — Image source: Shutterstock

Unpacking Return On Equity (ROE) with Rogers Communications Inc.

For those stepping into the world of stock analysis, understanding the various financial metrics used to evaluate a stock can be both fascinating and crucial. This overview delves into the Return On Equity (ROE) as a fundamental metric for assessing how effectively a company like Rogers Communications Inc. (TSE:RCI.B) generates returns on investments received from shareholders.

Understanding ROE

ROE, or Return On Equity, measures the profit generated per dollar invested by shareholders. It offers an indication of efficiency in utilizing shareholder funds. For a hands-on lesson, let's calculate the ROE for Rogers Communications using the formula:

Return on Equity = Net Profit ÷ Shareholders' Equity

Applying this, Rogers Communications boasts an ROE of 17% for the trailing twelve months to December 2024, calculated as CA$1.7 billion ÷ CA$10 billion. This suggests that for every Canadian dollar of shareholder capital, the company earned 17 cents in profit.

Assessing ROE Effectiveness

To gauge if Rogers Communications' ROE is commendable, it's common to reference the industry average. The company's ROE aligns closely with the Wireless Telecom industry's average of 19%. Though this isn't indicative of being exceptionally high or low, it does prompt a closer examination of how the company's ROE is supported by its financial practices.

Impact of Debt on ROE

In the business world, funding can be sourced through equity, retained earnings, or debt. Using debt can enhance returns, but it introduces additional risk, especially under adverse conditions. For Rogers Communications, a notable debt to equity ratio of 4.31 indicates extensive use of debt, giving context to its seemingly robust ROE.

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