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Compare return on equity across dated US industry peers using consistent earnings and average common equity. Worked examples show how weighting and leverage can change the apparent ranking.
Return on equity by industry is useful when the peers share a business model, reporting period and definition of common equity. Compare earnings with average equity, then separate operating performance from financing effects. An industry label alone does not make two companies comparable.
Choose peers whose economics resemble the business being reviewed: products, customers, capital requirements, geography and accounting policies. A distributor and a manufacturer can serve the same customer sector while using very different assets and funding structures.
The CFA Institute's financial analysis reading distinguishes comparisons across companies from comparisons over time and explains why industry-specific measures matter. Use both views: the peer comparison identifies questions, and the company's own trend helps determine whether conditions have improved.
For a supplied peer workbook, retain the company name, industry definition, fiscal year-end, source statement, earnings attributable to common owners, and opening and closing common equity. Add notes for preferred shares, outside ownership, acquisitions, distributions and unusual gains. Keep missing values blank and flag them for review.
Outside datasets are useful starting points when their scope and methods are understood. Aswath Damodaran's US sector ROE table, for example, identifies its analysis date and presents separate unadjusted and research-and-development-adjusted measures. Those definitions should travel with any figures copied into a company workbook.
Company ROE = Net income available to common shareholders / Average common book equity
Average common equity = (Opening common equity + Closing common equity) / 2
Aggregate peer ROE = Total common earnings / Total average common equity
The SEC's financial statement guide explains that an income statement covers a period while a balance sheet measures a point in time. Using average equity connects those different time bases. If a company issues capital or makes a major distribution during the year, consider time-weighted balances for all affected peers rather than letting year-end timing determine the ranking.
Use the same shareholder scope in both parts of the ratio. Common earnings belong over common equity. A consolidated earnings figure that includes income attributable to outside owners needs an adjustment before comparison with parent shareholders' common equity.
The basic metric and its broader context belong in the financial ratios guide. This page concerns the comparison method, rather than repeating every profitability ratio.
These are fictional US companies for the year ended December 31, 2025. They illustrate a method; the figures are not observed industry averages or market benchmarks. All amounts are USD, all balances are positive common equity, and percentages are calculated from unrounded inputs.
| Illustrative company | Industry group | Common earnings (USD) | Opening equity (USD) | Closing equity (USD) | Average equity (USD) | ROE |
|---|---|---|---|---|---|---|
| Food A | Food distribution | 1,200,000 | 9,000,000 | 11,000,000 | 10,000,000 | 12.0% |
| Food B | Food distribution | 300,000 | 4,000,000 | 6,000,000 | 5,000,000 | 6.0% |
| Industrial A | Industrial manufacturing | 2,400,000 | 18,000,000 | 22,000,000 | 20,000,000 | 12.0% |
| Industrial B | Industrial manufacturing | 1,500,000 | 9,000,000 | 11,000,000 | 10,000,000 | 15.0% |
| Service A | Business services | 1,500,000 | 4,000,000 | 6,000,000 | 5,000,000 | 30.0% |
| Service B | Business services | 1,200,000 | 9,000,000 | 11,000,000 | 10,000,000 | 12.0% |
For Food A, (9,000,000 + 11,000,000) / 2 gives average equity of $10,000,000. Earnings of $1,200,000 divided by that balance give ROE of 12.0%. Apply the same steps to every row before aggregating within each group.
| Illustrative industry group | Total earnings (USD) | Total average equity (USD) | Aggregate ROE | Simple average company ROE |
|---|---|---|---|---|
| Food distribution | 1,500,000 | 15,000,000 | 10.0% | 9.0% |
| Industrial manufacturing | 3,900,000 | 30,000,000 | 13.0% | 13.5% |
| Business services | 2,700,000 | 15,000,000 | 18.0% | 21.0% |
The food group's aggregate return is 1,500,000 / 15,000,000 = 10.0%. Its simple average is (12.0% + 6.0%) / 2 = 9.0%. Both are valid calculations, but they answer different questions: combined equity performance versus the average company percentage.
The aggregate ratio must equal the equity-weighted average of the company returns. For food distribution, the check is:
(10,000,000 × 12.0% + 5,000,000 × 6.0%) / 15,000,000 = 10.0%
The weighted numerator reconstructs $1,500,000 of earnings. A mismatch usually means the earnings scope, equity dates or row selection differs between calculations. The distinction is also explained in count-weighted and value-weighted measures.
Next inspect the financing effect within a peer group. Suppose the same industrial companies have these average total assets:
| Company | Average assets (USD) | Earnings / average assets | Average assets / average equity | ROE |
|---|---|---|---|---|
| Industrial A | 40,000,000 | 6.00% | 2.0 | 12.0% |
| Industrial B | 40,000,000 | 3.75% | 4.0 | 15.0% |
Industrial B earns less on the same average asset base but reports higher ROE. The identity proves why: 3.75% × 4.0 = 15.0%, compared with 6.00% × 2.0 = 12.0%. The assets-to-equity multiple reflects total liabilities, so inspect the funding schedule before attributing the difference specifically to interest-bearing debt.
Finance can pair this review with debt to equity by industry. A return ranking is the start of a capital discussion, not a substitute for it.
Keep banks in a separate peer group with suitable definitions; bank return on equity covers that specialized comparison.
Bring a file containing dated peer earnings, equity balances, industry labels and source notes: Covirage maps the columns, and its tools compute and check the figures. The external AI model explains the differences, with every figure traced to its rows. Create a free Covirage account, which takes about a minute, then set up your business and bring a sample of your own data.
See Covirage for finance teams for the team context.
A useful reference comes from comparable businesses measured over the same period under consistent accounting definitions. There is no single threshold that fits every industry. Review the peer distribution, your own trend, leverage and unusual items before setting a company target.
Use a simple average only when each company should carry equal weight. To measure profit earned on the group's combined equity, divide total common earnings by total average common equity. Label the method because those two questions can produce different answers.
A company can support a given asset base with less common equity when liabilities finance more of it. That smaller denominator can raise ROE even when profit relative to assets is lower. Review financing costs, debt and liquidity alongside the return.
Only with care. A business unit needs a defensible allocation of common equity, financing costs and taxes before its return resembles company ROE. If those allocations are unavailable, label the internal measure clearly and use a return based on the capital actually assigned.