Saturday, March 04, 2006

sustainable earnings growth

What's the big deal about ROE? Over time, a company's EPS growth will be limited by the returns it can generate on its equity, and how much of that equity it retains.

But that's over time. I seem to see a lot of cases where earnings growth is outstripping ROE, especially in early growth situations. In such cases, I suspect the two will converge closer with earnings growth dropping and ROE increasing.

No comments: