Switch to:
Nicholas Financial Inc (NAS:NICK)
Return on Equity
7.27% (As of Sep. 2016)

Return on equity is calculated as net income divided by its average shareholder equity. Nicholas Financial Inc's annualized net income for the quarter that ended in Sep. 2016 was \$7.78 Mil. Nicholas Financial Inc's average shareholder equity for the quarter that ended in Sep. 2016 was \$106.95 Mil. Therefore, Nicholas Financial Inc's annualized return on equity (ROE) for the quarter that ended in Sep. 2016 was 7.27%.

NICK' s Return on Equity Range Over the Past 10 Years
Min: 5.77   Max: 18.09
Current: 9.83

5.77
18.09

During the past 13 years, Nicholas Financial Inc's highest Return on Equity (ROE) was 18.09%. The lowest was 5.77%. And the median was 13.79%.

NICK's Return on Equity is ranked higher than
64% of the 364 Companies
in the Global Credit Services industry.

( Industry Median: 5.93 vs. NICK: 9.83 )

Definition

Nicholas Financial Inc's annualized Return on Equity (ROE) for the fiscal year that ended in Mar. 2016 is calculated as

 ROE = Net Income (A: Mar. 2016 ) / ( (Total Equity (A: Mar. 2015 ) + Total Equity (A: Mar. 2016 )) / 2 ) = 12.209 / ( (89.888 + 102.849) / 2 ) = 12.209 / 96.3685 = 12.67 %

Nicholas Financial Inc's annualized Return on Equity (ROE) for the quarter that ended in Sep. 2016 is calculated as

 ROE = Net Income (Q: Sep. 2016 ) / ( (Total Equity (Q: Jun. 2016 ) + Total Equity (Q: Sep. 2016 )) / 2 ) = 7.776 / ( (105.864 + 108.026) / 2 ) = 7.776 / 106.945 = 7.27 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

In the calculation of annual return on equity, the net income of the last fiscal year and the average total shareholder equity over the fiscal year are used. In calculating the quarterly data, the Net Income data used here is four times the quarterly (Sep. 2016) net income data. Return on Equity is displayed in the 15-year financial page.

Explanation

Return on Equity (ROE) measures the rate of return on the ownership interest (shareholder's equity) of the common stock owners. It measures a firm's efficiency at generating profits from every unit of shareholders' equity (also known as net assets or assets minus liabilities). ROE shows how well a company uses investment funds to generate earnings growth. ROEs between 15% and 20% are considered desirable.

The factors that affect a companys Return on Equity (ROE) can be illustrated with the Du Pont Formula:

 Return on Equity (ROE) (Q: Sep. 2016 ) = Net Income / Average Shareholder Equity = 7.776 / 106.945 = (Net Income / Revenue) * (Revenue / Average Total Assets) * (Average Total Assets / Average Equity) = (7.776 / 90.588) * (90.588 / 328.849) * (328.849 / 106.945) = Net Profit Margin * Asset Turnover * Leverage Ratio = 8.58 % * 0.2755 * 3.0749 = Return on Assets * Leverage Ratio = 2.36 % * 3.0749 = 7.27 %

Note: The Net Income data used here is four times the quarterly (Sep. 2016) net income data. The Revenue data used here is four times the quarterly (Sep. 2016) revenue data.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

With this breakdown, it is clear that if a company grows its Net Profit Margin, its Asset Turnover, or its Leverage, it can grow its return on equity.

Be Aware

The net income used here is the net income to common shareholders.

Because a company can increase its return on equity by having more financial leverage, it is important to watch the leverage ratio when investing in high ROE companies. Like ROA, ROE is calculated with only 12 months data. Fluctuations in companys earnings or business cycles can affect the ratio drastically. It is important to look at the ratio from a long term perspective.

Asset light businesses require very few assets to generate very high earnings. Their ROEs can be extremely high.

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Nicholas Financial Inc Annual Data

 Mar07 Mar08 Mar09 Mar10 Mar11 Mar12 Mar13 Mar14 Mar15 Mar16 ROE 18.09 13.04 5.77 11.91 15.81 17.74 15.21 12.42 14.54 12.67

Nicholas Financial Inc Quarterly Data

 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 ROE 13.59 11.60 9.82 12.54 15.99 13.65 11.07 10.08 11.01 7.27
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to \$400 per referral. ( Learn More)