Return On Equity (ROE): The Most Misunderstood Metric In Investing Teaminvest Wealth Builders podcast

Return on Equity (ROE): The Most Misunderstood Metric in Investing

6d ago 13:58

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Return on equity (ROE) is one of the most popular—and misunderstood—metrics in investing. In this episode, we break down what ROE really means, why it can be both a valuable tool and a dangerous trap, and how investors can avoid being misled by headline numbers. Using real-world examples like Qantas and the latest market trends, you’ll learn how to spot financial engineering, understand the impact of debt, and use ROE the right way in your investment decisions.

Key Topics Covered:

What is ROE and why do investors love it?
Why a high ROE isn’t always a good sign
Real-world examples: Qantas, buybacks, and financial engineering
The main ROE traps: debt, shrinking equity, and misleading growth
The “Buffett trap”—and why capital structure matters
How to dig deeper: cash flow, net debt, and ROIC
Practical tips for using ROE in today’s high-interest-rate environment

Timestamps:
00:00 – Welcome & why ROE is misunderstood
02:00 – ROE basics: calculation and appeal
04:30 – Why ROE can be misleading
07:00 – Case study: Qantas and the ROE illusion
10:30 – The five ROE traps every investor should know
16:00 – Protect yourself: what to check beyond the headline
21:00 – ROE in the 2025 market: high rates, buybacks, and investor scrutiny
26:00 – Practical tips: cash flow, debt, ROIC, and management commentary
30:00 – Summary: using ROE wisely

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About Teaminvest:
Teaminvest is an ASX-listed financial institution focused on empowering investors through education, in-depth analysis, and a community of like-minded wealth builders.

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