XeroASX:XRO +0.06%76 Return-on-Tangible-Equity is 3.49% as of Mar. 2026. GuruFocus rates ASX:XRO with a GF Score™ of 76/100 and a GF Value™ of A$195.57 (Possible Value Trap). The stock has 7 warning signs investors should review. Among 2,471 Software companies, Xero ranks better than 55.89% on this metric.
Return-on-Tangible-Equity is calculated as Net Income divided by its average total shareholder tangible equity. Total shareholder tangible equity equals to Total Stockholders Equity minus Intangible Assets. Xero's annualized net income for the quarter that ended in Mar. 2026 was A$43 Mil. Xero's average shareholder tangible equity for the quarter that ended in Mar. 2026 was A$1,232 Mil. Therefore, Xero's annualized Return-on-Tangible-Equity for the quarter that ended in Mar. 2026 was 3.49%.
The historical rank and industry rank for Xero's Return-on-Tangible-Equity or its related term are showing as below:
ASX:XRO'
s Return-on-Tangible-Equity Range Over the Past 10 Years
Min: -137.69 Med: -0.4 Max: 69.64
Current: 12.36
During the past 13 years, Xero's highest Return-on-Tangible-Equity was 69.64%. The lowest was -137.69%. And the median was -0.40%.
ASX:XRO's Return-on-Tangible-Equity is ranked better than 55.89% of 2471
companies
in the Software industry
Industry Median: 8.77
vs ASX:XRO: 12.36
Return-on-Tangible-Equity measures the rate of return on the ownership interest (shareholder's tangible equity) of the common stock owners. It measures a firm's efficiency at generating profits from every unit of shareholders' tangible equity (shareholders equity minus intangibles). Return-on-Tangible-Equity shows how well a company uses investment funds to generate earnings growth. Return-on-Tangible-Equitys between 15% and 20% are considered desirable.
Be Aware
Net Income is used.
Because a company can increase its Return-on-Tangible-Equity by having more financial leverage, it is important to watch the leverage ratio when investing in high Return-on-Tangible-Equity companies. Like Return-on-Tangible-Asset, Return-on-Tangible-Equity 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 Return-on-Tangible-Equitys can be extremely high.
Xero Return-on-Tangible-Equity Related Terms
Xero Return-on-Tangible-Equity Historical Data
* Premium members only.
The historical data trend for Xero's Return-on-Tangible-Equity can be seen below:
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
ASX:XRO vs UBER, SHOP, CRM: Return-on-Tangible-Equity Comparison
For the Software - Application subindustry, Xero's Return-on-Tangible-Equity, along with its competitors' market caps and Return-on-Tangible-Equity data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Xero Return-on-Tangible-Equity vs Software Industry
For the Software industry and Technology sector, Xero's Return-on-Tangible-Equity distribution charts can be found below:
* The bar in red indicates where Xero's Return-on-Tangible-Equity falls into.
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
In the calculation of annual Return-on-Tangible-Equity, the net income of the last fiscal year and the average total shareholder tangible equity over the fiscal year are used. In calculating the quarterly data,
the net income data used here is two times the semi-annual (Mar. 2026) net income data.
Return-on-Tangible-Equity is displayed in the 10-year financial page.
What does a Return-on-Tangible-Equity of 3.49% mean?
Xero (ASX:XRO) has a Return-on-Tangible-Equity of 3.49% as of Mar. 2026. Return on tangible equity is the ratio of current-period net income to average two-period tangible equity. View historical data on Xero and its competitors. According to the industry distribution chart, Xero ranks #1090 out of 2471 companies in the Software industry, placing it in the top 44.1%.
Is Xero's Return-on-Tangible-Equity too high?
Xero's current Return-on-Tangible-Equity is 3.49%. The Software industry median Return-on-Tangible-Equity is 8.77. Xero's value of 3.49% is 60.2% below this industry median. Based on the distribution chart, Xero ranks #1090 out of 2471 companies in the Software industry, which is above the industry midpoint. Overall, Xero has a GF Score™ of 76/100 and is considered Possible Value Trap, reflecting its overall financial health beyond just this single metric.
How does Xero's Return-on-Tangible-Equity compare to UBER and SHOP?
According to the Software industry distribution chart, Xero ranks #1090 out of 2471 companies for Return-on-Tangible-Equity. This puts Xero in the upper half of its industry. The industry median Return-on-Tangible-Equity is 8.77. Xero's value of 3.49% is 60.2% below this benchmark. See the competitive comparison table and distribution chart on this page for a detailed peer-by-peer breakdown.
What is a good Return-on-Tangible-Equity for a Software company?
The median Return-on-Tangible-Equity among Software companies is 8.77, based on 2,471 companies in the industry. Companies in the top quartile (top 25%) have a Return-on-Tangible-Equity significantly above this median, while those in the bottom quartile fall well below. However, Return-on-Tangible-Equity should not be evaluated in isolation — investors should consider it alongside profitability, growth, and financial strength metrics. Xero's current Return-on-Tangible-Equity of 3.49% is 60.2% below the industry median. Use the industry distribution chart on this page to see where any company falls relative to its peers.
What does a high Return-on-Tangible-Equity mean?
A high Return-on-Tangible-Equity can signal that a stock is expensive relative to its fundamentals. Return on tangible equity is the ratio of current-period net income to average two-period tangible equity. View historical data on Xero and its competitors. For the Software industry, the median Return-on-Tangible-Equity is 8.77 — values significantly above this may indicate overvaluation, while values below may suggest a bargain or underlying issues. Xero's current Return-on-Tangible-Equity is 3.49%. However, context matters — high-growth companies often justify higher valuations. Always evaluate alongside other metrics like GF Score™ and GF Value™.
Is Xero stock overvalued right now?
Based on GuruFocus' analysis, Xero (ASX:XRO) is currently considered Possible Value Trap. The stock's GF Value™ is A$195.57, compared to a current price of A$72.22 — trading 63.1% below its estimated fair value. The current Return-on-Tangible-Equity is 3.49% and 60.2% below the Software industry median of 8.77. Xero's overall GF Score™ is 76/100 with 7 warning signs to review. Investors should evaluate multiple metrics — including profitability, growth, and financial strength — before making a decision.
How is Return-on-Tangible-Equity calculated?
Return-on-Tangible-Equity is calculated from a company's financial statements. For Xero (ASX:XRO), the current Return-on-Tangible-Equity is 3.49% as of Mar. 2026. GuruFocus calculates this using data sourced from SEC filings and annual reports. See the calculation section and 30-year financial data on this page for the full breakdown.
Is Xero (ASX:XRO) Overvalued in 2026?
Based on GuruFocus' analysis, Xero stock appears to be undervalued.
The current stock price of A$72.22 is trading 63.1% below its estimated GF Value™ of A$195.57.
GuruFocus considers Xero to be Possible Value Trap.
Key valuation signals for ASX:XRO:
Return-on-Tangible-Equity: 3.49%
GF Value™: A$195.57 vs. price of A$72.22 (63.1% below fair value)
Industry Position: 60.2% below the Software median (#1090 of 2471)
No single metric tells the full story. See the ASX:XRO stock analysis page for a complete view including 30-year financials, guru trades, and insider activity.
Xero is a technology company originating from New Zealand, providing cloud-based accounting software, primarily for small and midsized enterprises, or SMEs, and accounting practices. As a first mover in the space for cloud-based accounting software, Xero has grown quickly to achieve dominant market share in New Zealand and Australia, displacing legacy providers. Xero has also expanded beyond its home region toward other English-speaking countries, primarily the UK and the US.
76GF Score
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