I
nvesting in knowledge is one of the most valuable choices we can make. To illustrate how Return on Equity (ROE) helps evaluate a company, we’ll analyze Novavest Real Estate AG (VTX:NREN) with a concrete example.

    ROE measures how efficiently a firm turns shareholders’ capital into profit. It is calculated as:

    ROE = Net Profit from continuing operations ÷ Shareholders’ Equity

    For Novavest, the trailing‑12‑month figures to June 2025 give:

    ROE = CHF 30 million ÷ CHF 425 million = 7.1 %

    This means the company earned CHF 0.07 of profit for every CHF 1 of equity invested. Comparing this to the real‑estate sector average of 8.0 % shows Novavest’s performance is close to peers, neither outstanding nor poor.

    However, ROE can be inflated by high leverage. Novavest’s debt‑to‑equity ratio is 1.24, indicating substantial borrowing. While debt can boost returns, it also raises financial risk and limits future flexibility. With a modest ROE and significant leverage, the outlook is cautious.

    In practice, shareholders should assess ROE alongside industry benchmarks and the company’s capital structure. A healthy ROE that is not overly dependent on debt signals a more sustainable business model.