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Mondelez International (NASDAQ:MDLZ) has had a rough three months with its share price down 9.0%. However, stock prices are usually driven by a company’s financials over the long term, which in this case look pretty respectable. Specifically, we decided to study Mondelez International’s ROE in this article.
ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company’s shareholders.
Return on equity can be calculated by using the formula:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
So, based on the above formula, the ROE for Mondelez International is:
14% = US$3.7b ÷ US$26b (Based on the trailing twelve months to June 2025).
The ‘return’ is the profit over the last twelve months. Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.14 in profit.
See our latest analysis for Mondelez International
We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. 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 everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don’t necessarily bear these characteristics.
To start with, Mondelez International’s ROE looks acceptable. On comparing with the average industry ROE of 10% the company’s ROE looks pretty remarkable. Yet, Mondelez International has posted measly growth of 2.3% over the past five years. This is generally not the case as when a company has a high rate of return it should usually also have a high earnings growth rate. Such a scenario is likely to take place when a company pays out a huge portion of its earnings as dividends, or is faced with competitive pressures.
As a next step, we compared Mondelez International’s net income growth with the industry and were disappointed to see that the company’s growth is lower than the industry average growth of 11% in the same period.
