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It is hard to get excited after looking at Uber Technologies’ (NYSE:UBER) recent performance, when its stock has declined 7.2% over the past month. However, stock prices are usually driven by a company’s financial performance over the long term, which in this case looks quite promising. Specifically, we decided to study Uber Technologies’ ROE in this article.
Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company’s shareholders.
The formula for return on equity is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
So, based on the above formula, the ROE for Uber Technologies is:
54% = US$12b ÷ US$23b (Based on the trailing twelve months to March 2025).
The ‘return’ refers to a company’s earnings over the last year. So, this means that for every $1 of its shareholder’s investments, the company generates a profit of $0.54.
Check out our latest analysis for Uber Technologies
Thus far, we have learned that ROE measures how efficiently a company is generating its profits. We now need to evaluate how much profit the company reinvests or “retains” for future growth which then gives us an idea about the growth potential of the company. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don’t have the same features.
To begin with, Uber Technologies has a pretty high ROE which is interesting. Additionally, the company’s ROE is higher compared to the industry average of 12% which is quite remarkable. As a result, Uber Technologies’ exceptional 59% net income growth seen over the past five years, doesn’t come as a surprise.
Next, on comparing with the industry net income growth, we found that Uber Technologies’ growth is quite high when compared to the industry average growth of 6.2% in the same period, which is great to see.
The basis for attaching value to a company is, to a great extent, tied to its earnings growth. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. If you’re wondering about Uber Technologies”s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
