Lennox International (NYSE:LII) has had a rough three months with its share price down 20%. But if you pay close attention, you might gather that its strong financials could mean that the stock could potentially see an increase in value in the long-term, given how markets usually reward companies with good financial health. Particularly, we will be paying attention to Lennox International’s ROE today.
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. Put another way, it reveals the company’s success at turning shareholder investments into profits.
The formula for ROE is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
So, based on the above formula, the ROE for Lennox International is:
79% = US$841m ÷ US$1.1b (Based on the trailing twelve months to September 2025).
The ‘return’ refers to a company’s earnings over the last year. Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.79 in profit.
See our latest analysis for Lennox International
We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. Based on how much of its profits the company chooses to reinvest or “retain”, we are then able to evaluate a company’s future ability to generate profits. 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.
Firstly, we acknowledge that Lennox International has a significantly high ROE. Secondly, even when compared to the industry average of 13% the company’s ROE is quite impressive. This likely paved the way for the modest 16% net income growth seen by Lennox International over the past five years.
Next, on comparing Lennox International’s net income growth with the industry, we found that the company’s reported growth is similar to the industry average growth rate of 14% over the last few years.
Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is LII fairly valued? This infographic on the company’s intrinsic value has everything you need to know.
