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Toll Brothers Inc (NYSE:TOL)
Return on Equity
10.43% (As of Jul. 2014)

Return on equity is calculated as net income divided by its average shareholder equity. Toll Brothers Inc's annualized net income for the quarter that ended in Jul. 2014 was $391 Mil. Toll Brothers Inc's average shareholder equity for the quarter that ended in Jul. 2014 was $3,749 Mil. Therefore, Toll Brothers Inc's annualized return on equity (ROE) for the quarter that ended in Jul. 2014 was 10.43%.

TOL' s 10-Year Return on Equity Range
Min: -26.29   Max: 34.42
Current: 8.59

-26.29
34.42

During the past 13 years, Toll Brothers Inc's highest Return on Equity (ROE) was 34.42%. The lowest was -26.29%. And the median was 18.59%.

TOL's Return on Equityis ranked higher than
76% of the 473 Companies
in the Global Residential Construction industry.

( Industry Median: 6.23 vs. TOL: 8.59 )

Definition

Toll Brothers Inc's annualized Return on Equity (ROE) for the fiscal year that ended in Oct. 2013 is calculated as

ROE=Net Income (A: Oct. 2013 )/( (Total Equity (A: Oct. 2012 )+Total Equity (A: Oct. 2013 ))/ 2 )
=170.606/( (3121.7+3332.987)/ 2 )
=170.606/3227.3435
=5.29 %

Toll Brothers Inc's annualized Return on Equity (ROE) for the quarter that ended in Jul. 2014 is calculated as

ROE=Net Income (Q: Jul. 2014 )/( (Total Equity (Q: Apr. 2014 )+Total Equity (Q: Jul. 2014 ))/ 2 )
=390.828/( (3696.809+3800.575)/ 2 )
=390.828/3748.692
=10.43 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own 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 (Jul. 2014) net income data. Return on Equity is displayed in the 10-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: Jul. 2014 )
=Net Income/Average Shareholder Equity
=390.828/3748.692
=(Net Income / Revenue)*(Revenue / Average Total Assets)*(Average Total Assets / Average Equity)
=(390.828 / 4227.428)*(4227.428 / 8288.491)*(8288.491 / 3748.692)
=Net Profit Margin*Asset Turnover*Leverage Ratio
=9.25 %*0.51*2.211
=Return on Assets*Leverage Ratio
=4.72 %*2.211
=10.43 %

Note: The Net Income data used here is four times the quarterly (Jul. 2014) net income data. The Revenue data used here is four times the quarterly (Jul. 2014) revenue data.

* All numbers are in millions except for per share data and ratio. All numbers are in their own 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

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

Return on Assets, Return on Tangible Equity, Return on Tangible Assets, Return on Capital, Return on Capital - Joel Greenblatt, Total Equity


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Toll Brothers Inc Annual Data

Oct04Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13
ROE 24.0934.4222.241.03-8.80-26.29-0.131.5517.075.29

Toll Brothers Inc Quarterly Data

Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14
ROE 2.589.2756.580.573.135.8511.605.247.1310.43
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