Quantitative Stock StrategyVerified Methodology

High ROE Stocks: Elite Capital Allocators Ranked by Return on Equity

Strategy developed by VCP Scanner Editorial Team

Companies earning 20%+ return on shareholder equity — the quality threshold Buffett cites for "wonderful businesses." ROIC ≥ 15% confirms genuine capital efficiency, not leverage tricks. Sorted by ROE descending.

QualityNamed Strategy7 live rules

How We Build This List

ROE ≥ 20%Elite capital efficiency — exceeds S&P 500 median (14–16%) and signals structural competitive advantage.
ROIC ≥ 15%Validates ROE isn't debt-inflated — measures returns on all capital, not just equity.
Debt/Equity ≤ 1Caps leverage to ensure high ROE reflects operations, not financial engineering.
Market Cap ≥ $1BProven scale — ROE at this size reflects real competitive advantage.
ROE ≤ 200%Filters out statistical artifacts from near-zero equity bases.
Excludes ADRsUS GAAP companies only for consistent ROE measurement.

Open Screener →

50 stocks foundUpdated 2026-05-06T14:45:45.168Z

Customize Filters →

Ticker	Company	ROE	ROIC	D/E	Gross M	FCF Margin
UI	Ubiquiti Inc.	186.5%	81.4%	0.4	43.4%	24.4%
SEZL	Sezzle Inc.	103.3%	52.7%	0.8	85.4%	46.3%
XZO	Exzeo Group, Inc.	102.1%	62.6%	0.5	39.5%	140.8%
NVDA	NVIDIA Corporation	101.5%	81.8%	0.1	71.1%	44.8%
PSIX	Power Solutions International, Inc.	93.5%	36.9%	0.9	—	—
ADMA	ADMA Biologics, Inc.	81.6%	37.7%	0.2	51.5%	25.8%
MANH	Manhattan Associates, Inc.	71.7%	236.8%	0.4	55.7%	34.6%
MEDP	Medpace Holdings, Inc.	70.2%	154.9%	0.5	30.1%	26.9%
IDXX	IDEXX Laboratories, Inc.	66.2%	42.5%	0.7	61.8%	24.5%
BLBD	Blue Bird Corporation	61.6%	98.2%	0.4	20.5%	10.4%
AMP	Ameriprise Financial, Inc.	60.5%	31.3%	0.9	50.4%	15.3%
RRR	Red Rock Resorts, Inc.	58.9%	23.4%	0.2	52.6%	14.4%
LRCX	Lam Research Corporation	58.2%	55.7%	0.5	48.7%	29.4%
ABTC	American Bitcoin Corp	57.6%	47.2%	0.0	44.8%	-125.4%
PEGA	Pegasystems Inc.	57.3%	27.2%	0.1	75.9%	28.1%
ADBE	Adobe Inc.	55.4%	51.4%	0.6	88.6%	41.4%
TMDX	TransMedics Group, Inc.	54.2%	18.8%	1.0	59.9%	22.1%
V	Visa Inc.	52.1%	29.2%	0.7	80.4%	53.9%
WSM	Williams-Sonoma, Inc.	51.5%	44.3%	0.7	46.2%	13.5%
BOX	Box, Inc.	51.4%	64.7%	0.4	79.2%	29.8%
MAZE	Maze Therapeutics, Inc.	50.5%	150.9%	0.1	100%	44.7%
CVNA	Carvana Co.	50.4%	34.3%	0.2	20.6%	4.4%
FIX	Comfort Systems USA, Inc.	49.2%	53%	0.3	24.1%	11.3%
VRRM	Verra Mobility Corporation	49%	23.5%	0.1	96.9%	14%
NATL	NCR Atleos Corporation	48.6%	23.4%	0.6	24.4%	5.5%
BKE	The Buckle, Inc.	46.7%	38.4%	0.8	48.7%	16.4%
PXED	Phoenix Education Partners, Inc	45.5%	104.9%	0.3	56.7%	6.4%
TYG	Tortoise Energy Infrastructure Corporation	44.9%	27.8%	0.2	100%	5.8%
ULTA	Ulta Beauty, Inc.	43.6%	87.9%	0.8	39.1%	8.6%
GWW	W.W. Grainger, Inc.	43.5%	32.1%	0.8	39.1%	7.4%

See all 50 stocks →

What Is Return on Equity (ROE)?

ROE = Net Income ÷ Shareholders' Equity. A company earning $200M on $1B equity has 20% ROE — it returns $20 for every $100 shareholders invested.

ROE answers: how efficiently does management convert your capital into profit?

The DuPont breakdown:

Net Margin — profit per dollar of revenue
Asset Turnover — revenue generated per dollar of assets
Equity Multiplier — leverage factor (debt amplifies returns)

ROE = Margin × Turnover × Leverage. High ROE from margins and turnover = durable quality. High ROE from leverage = potential risk.

Sector context: Capital-light businesses (software, payment networks) often hit 20–40%+ ROE. Asset-heavy industries (utilities, airlines) typically struggle to reach 15%. The ROIC filter helps normalize this.

Why 20% ROE Is the Quality Threshold

Cost of equity for US large-caps is roughly 8–10%. At 20% ROE, a company earns a 10–12 point spread above that hurdle — enough to compound meaningfully.

Context benchmarks:

S&P 500 median ROE: 14–16%
Berkshire Hathaway's historical book value growth: ~19–20%
Elite franchises (Visa, Apple, Coca-Cola): 30–50%+

The math: A company earning 20% ROE and retaining 50% of earnings grows equity at 10% annually. At 7% ROE with the same retention, growth is just 3.5%. That gap widens dramatically over 10–20 years.

Buffett identified 20% ROE as his benchmark for "wonderful businesses" in his 1977–79 shareholder letters.

ROE vs ROIC: Why Both Matter

ROE = Net Income ÷ Equity — measures returns to shareholders. Can be inflated by debt.

ROIC = NOPAT ÷ Invested Capital — measures returns on ALL capital (debt + equity). Not inflated by leverage.

The key insight: When ROE significantly exceeds ROIC, leverage is doing the work.

Quick examples:

Quality: ROE 28%, ROIC 22%, D/E 0.4 — genuine business strength ✓
Acceptable: ROE 25%, ROIC 16%, D/E 0.8 — some leverage, but ROIC still solid ✓
Leverage trap: ROE 35%, ROIC 9%, D/E 3.5 — blocked by this screen's filters ✗

How to read the table: Check ROE (col 3) vs ROIC (col 4). Ratio close to 1.0–1.5 = quality capital structure. Above 2× = investigate D/E and margin columns.

How Debt Inflates ROE (And How to Spot It)

A company with $10M net income on $100M equity = 10% ROE. Borrow $100M, earn slightly more than the interest cost, and ROE jumps to 16% — but the actual business hasn't improved.

Common leverage traps:

Leveraged retailers — 25–30% ROE but only 8–10% ROIC
Debt-financed acquirers — small equity base vs. large asset base
Aggressive buyback programs — shrinking equity with borrowed money

This screen's protection:

ROE ≥ 20% — eliminates mediocre businesses
ROIC ≥ 15% — strips leverage amplification
D/E ≤ 1 — caps extreme financial engineering

A company passing all three earns high returns through operational excellence, not leverage.

How to Use This Screen

Step 1 — Validate quality

ROE/ROIC close together = genuine quality (not leverage-driven)
Gross margin 25%+ = pricing power backing the ROE
FCF margin positive = profits convert to real cash

Step 2 — Check durability

Is gross margin stable or expanding over 3+ years?
Tech and consumer brands sustain ROE better than commodity businesses
Does the company have a real moat (brand, network effect, switching costs)?

Step 3 — Evaluate valuation

High-ROE companies trade at premiums. Rough guide: 25% sustainable ROE can justify 25–35× P/E. Check the P/E column against ROE for a quick quality/price ratio.

Portfolio notes:

Diversify across sectors — results cluster in tech, healthcare, financials
These are quality-growth names, not defensive — they drawdown in risk-off markets
Combine with the Buffett screen (5Y avg ROE) for proven compounders

ROE and Compounding: The Math That Matters

The compounding difference:

Two $1B companies, both retaining 50% of earnings:

25% ROE: After 10 years → $3.25B equity, $4B+ cumulative earnings
12% ROE (S&P median): After 10 years → $1.79B equity, $1.7B cumulative earnings

Same retention rate, same starting point — but 25% ROE creates nearly twice the earnings.

Why high-ROE companies deserve premium multiples: Superior future earnings justify paying more today. Academic research ("Quality Minus Junk", Asness et al. 2013) shows quality stocks consistently outperform across markets and decades.

The catch — mean reversion: ROE above 30–40% typically compresses over 5–10 years as competitors adapt. The businesses that sustain high ROE longest have structural moats: brands, network effects, regulatory licenses, or high switching costs. Use gross margin and ROIC columns to gauge durability.

Frequently Asked Questions

What is a good return on equity (ROE) for a stock?

ROE above 15% is generally considered good — it exceeds the average cost of equity capital for US companies. ROE above 20% is excellent and signals structural competitive advantage; this is the threshold Warren Buffett and most quality investors use as their primary quality gate. ROE above 30% indicates exceptional capital efficiency and typically implies either a dominant brand, a network effect, or a business model with very high recurring margins. Below 10%, a company is creating marginal value at best and may actually be destroying value when capital costs are considered.

Can ROE be too high? What does very high ROE mean?

ROE above 40–50% deserves scrutiny, but high ROE is not inherently problematic. Legitimate very-high-ROE businesses include branded software (minimal tangible capital), payment networks (extremely capital-light at scale), and consumer franchises with negative working capital. The concern is whether the high ROE is genuinely earned through operational excellence or inflated by: (a) negative book equity from large buybacks — technically undefined or very high ROE; (b) extreme financial leverage compressing the equity denominator; or (c) a cyclical earnings peak that will normalize. This screen caps ROE at 200% to eliminate statistical artifacts (companies showing 500–10,000%+ ROE from near-zero equity bases) while preserving genuinely high-ROE buyback companies. The ROIC ≥ 15% and D/E ≤ 1 filters handle the remaining problematic cases.

What is the difference between ROE and ROIC?

ROE (Return on Equity) = Net Income ÷ Shareholders' Equity, measuring returns on equity capital only. ROIC (Return on Invested Capital) = NOPAT ÷ (Equity + Debt), measuring returns on the total capital base. The critical difference: ROE can be inflated by financial leverage — if a company borrows heavily and shrinks its equity base, ROE rises even if the underlying business earns mediocre returns. ROIC is unaffected by leverage (adding debt increases both numerator and denominator proportionally). When ROE significantly exceeds ROIC for a given company, leverage is doing much of the work. This screen requires both ROE ≥ 20% and ROIC ≥ 15% to ensure both equity and total-capital efficiency are genuine.

Why does this screen require ROIC ≥ 15% in addition to ROE ≥ 20%?

The ROIC filter is the debt-inflation check on the ROE signal. A company earning 24% ROE but only 9% ROIC is telling you that financial leverage is bridging the gap — the underlying business earns mediocre returns, and the elevated equity return is a capital structure artifact. Over time, debt-inflated ROE is unstable because it depends on continued access to cheap credit and avoidance of financial stress. A company earning 22% ROE and 18% ROIC is earning high returns on all deployed capital — debt and equity alike — which is the signature of genuine operational competitive advantage. The paired requirement filters for businesses that meet the quality test on both measures simultaneously.

Is a high-ROE stock automatically a good investment?

High ROE is strong evidence of quality but does not by itself determine whether a stock is a good investment at its current price. High-ROE companies typically trade at premium P/E and P/B multiples precisely because the market recognizes their quality — an appropriate premium for the superior compounding potential. The risk is overpaying: if a stock's P/E is 45× for a business earning 22% ROE, much of the next 3–5 years of compounding is already priced in. The best investments combine high sustainable ROE (proven, not one-year cyclical) with a valuation that does not fully capture the next decade of above-average returns. Use the P/E column (col 9) and 3Y total return (col 10) to assess whether the quality premium has already been realized.

How does ROE compare across different sectors?

ROE varies significantly by sector and should be interpreted in sector context. Technology and consumer brands (software, payment networks, branded goods) routinely generate 25–50%+ ROE because their business models are capital-light. Financial companies (banks, insurers) often show elevated ROE because financial leverage is inherent to their business model — this screen's ROIC filter adjusts for this. Utilities, industrial manufacturers, and airlines typically earn 8–15% ROE because large asset bases drag down the asset-turnover component of the DuPont formula. The ROIC ≥ 15% requirement provides a sector-normalized quality check that makes the screen more comparable across different capital-structure contexts.

How often does ROE change, and how frequently should I check this screen?

ROE (TTM) is recalculated each quarter as new financial data is filed (10-Q and 10-K reports). A significant ROE change in a single quarter can signal a one-time event — large asset sale, unusual write-down, or exceptional revenue quarter — rather than a durable improvement or deterioration. The screen is updated daily as data providers refresh their databases with the latest trailing twelve-month figures. Rescreening quarterly after earnings season ends (when most 10-Q filings are processed) provides the most current picture. An investor holding positions should monitor for ROE drops below 20% or ROIC drops below 15% as early warning signals that the quality thesis is weakening.

Do high-ROE stocks perform better in all market conditions?

High-ROE companies outperform over full market cycles, but they are not defensive stocks. In risk-off conditions and recessions, high-quality high-ROE businesses often sell off with the market — sometimes more sharply, because they carry premium valuations that compress when risk appetite falls. However, quality companies with durable competitive advantages tend to recover faster than lower-quality peers because their earnings streams are more resilient and their balance sheets provide strategic optionality. The academic quality factor (Novy-Marx 2013, Asness et al. 2013) shows persistent positive returns over full cycles but meaningful short-term periods where quality underperforms in momentum-driven or deep-value-driven markets.

How many high-ROE stocks should I hold in a portfolio?

A focused quality portfolio of 10–20 high-ROE, high-ROIC companies provides meaningful diversification across sectors while preserving the concentrated conviction that allows the quality premium to compound. Fewer than 10 positions creates excessive single-company risk even in high-quality names — earnings disappointments, management changes, or competitive disruptions can affect any individual company. More than 30 positions in a quality screen typically means diluting standards by including marginal quality names toward the bottom of the ROE ranking. Cross-sector diversification matters: avoid concentrating more than 30–40% of a quality portfolio in any single sector, since high-ROE screens naturally weight heavily toward technology, healthcare, and financial companies.

How does the high-ROE screen differ from the Buffett screen on this site?

The Buffett screen requires 5-year average ROE ≥ 15% — emphasizing consistency across market cycles over a multi-year period, combined with gross margin ≥ 30%, FCF margin ≥ 10%, D/E ≤ 0.5, and a $2B+ market cap. It captures proven, long-established franchise quality. The high-ROE screen uses current TTM ROE ≥ 20%, ROIC ≥ 15%, and D/E ≤ 1 — it will surface companies with recently elevated ROE that a 5-year average would not yet capture, including quality businesses emerging from capital-allocation improvements, recently improved operational efficiency, or post-restructuring returns. The two screens are complementary: buffett-stocks finds the most durably proven franchise compounders; high-roe-stocks finds today's highest capital efficiency leaders, some of which will qualify for the Buffett screen in 3–5 years.

Open the Screener

Start with these ideas, customize the filters, or build from scratch using 200+ financial metrics.

Open Screener