Should You Be Excited About Talen Energy Corporation's (NASDAQ:TLN) 35% Return On Equity?

Simply Wall St.10-02

While some investors are already well versed in financial metrics (hat tip), this article is for those who would like to learn about Return On Equity (ROE) and why it is important. We'll use ROE to ...

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We'll use ROE to ...</p>\n\n<a href=\"https://finance.yahoo.com/news/excited-talen-energy-corporations-nasdaq-102621711.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"IE00BKPKM429.USD","symbol_name":"NEUBERGER BERMAN GLOBAL SUSTAINABLE EQUITY \"A\" (USD) ACC","start_time":0,"source_url":"https://finance.yahoo.com/news/excited-talen-energy-corporations-nasdaq-102621711.html","article_id":"2472454555","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/aqaSC7m1tdhfwDwBOMCsNg--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/f1f0f398416d2d2a408886a3ad9282ac"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2472454555","pubTimestamp":1727864781,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"While some investors are already well versed in financial metrics , this article is for those who would like to learn about Return On Equity  and why it is important. 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If two companies","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"IE00BKPKM429.USD":"NEUBERGER BERMAN GLOBAL SUSTAINABLE EQUITY \"A\" (USD) ACC","BK4588":"碎股","TLN":"Talen Energy Corporation","SQQQ":"纳指三倍做空ETF","ROE":"ASTORIA US QUALITY KINGS ETF",".IXIC":"NASDAQ Composite","TLNE":"Talen Energy Corp","LU2065171311.SGD":"M&G (LUX) GLOBAL MAXIMA \"A\" (SGD) ACC","LU2065171402.SGD":"M&G (LUX) GLOBAL MAXIMA \"A\" (SGD) INC","QLD":"纳指两倍做多ETF","BK4112":"金融交易所和数据","TQQQ":"纳指三倍做多ETF","BK4105":"独立电力生产商与能源贸易商","LU2095319765.USD":"Natixis Thematics Subscription Economy R/A USD","PSQ":"纳指反向ETF","LU2210150020.SGD":"Natixis Thematics Subscription Economy R/A SGD","LU2065170008.USD":"M&G (LUX) GLOBAL MAXIMA \"A\" (USD) INC","LU2210149790.SGD":"Natixis Thematics Subscription Economy R/A SGD-H","EQR":"资产住宅公司","BK4215":"住宅房地产投资信托","NDAQ":"纳斯达克OMX交易所","IE00B64PRP62.GBP":"GUINNESS GLOBAL MONEY MANAGERS \"C\" (GBP) ACC","BK4585":"ETF&股票定投概念","LU2065169927.USD":"M&G (LUX) GLOBAL MAXIMA \"A\" (USD) ACC","IE00B3QW5Z07.USD":"GUINNESS GLOBAL MONEY MANAGERS \"C\" (USD) ACC","IE00BGHQF748.EUR":"GUINNESS GLOBAL MONEY MANAGERS \"C\" (EUR) ACC","QID":"纳指两倍做空ETF"},"translate_title":"您应该对Talen Energy Corporation（纳斯达克股票代码：TLN）35%的股本回报率感到兴奋吗？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TLNE":1,"TLN":1,"ROE":1,"EQR":1,"NDAQ":1,".IXIC":1,"TQQQ":0.6,"SQQQ":0.6,"QLD":0.6,"QID":0.6,"PSQ":0.6,"NQmain":0.6,"MNQmain":0.6},"content_text":"While some investors are already well versed in financial metrics (hat tip), this article is for those who would like to learn about Return On Equity (ROE) and why it is important. We'll use ROE to examine Talen Energy Corporation (NASDAQ:TLN), by way of a worked example. \n 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. \n Check out our latest analysis for Talen Energy \n How To Calculate Return On Equity? \n ROE can be calculated by using the formula: \n Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity \nSo, based on the above formula, the ROE for Talen Energy is:\n35% = US$889m ÷ US$2.6b (Based on the trailing twelve months to June 2024).\n The 'return' refers to a company's earnings over the last year. That means that for every $1 worth of shareholders' equity, the company generated $0.35 in profit. \n Does Talen Energy Have A Good ROE? \n Arguably the easiest way to assess company's ROE is to compare it with the average in its industry. Importantly, this is far from a perfect measure, because companies differ significantly within the same industry classification. As you can see in the graphic below, Talen Energy has a higher ROE than the average (4.6%) in the Renewable Energy industry. \n\n\n\n  NasdaqGS:TLN Return on Equity October 2nd 2024\n \n\n That is a good sign. With that said, a high ROE doesn't always indicate high profitability. Aside from changes in net income, a high ROE can also be the outcome of high debt relative to equity, which indicates risk. You can see the 3 risks we have identified for Talen Energy by visiting our risks dashboard for free  on our platform here. \n How Does Debt Impact Return On Equity? \n Companies usually need to invest money to grow their profits. That cash can come from issuing shares, retained earnings, or debt. In the case of the first and second options, the ROE will reflect this use of cash, for growth. In the latter case, the use of debt will improve the returns, but will not change the equity. Thus the use of debt can improve ROE, albeit along with extra risk in the case of stormy weather, metaphorically speaking. \n Combining Talen Energy's Debt And Its 35% Return On Equity \n Talen Energy does use a high amount of debt to increase returns. It has a debt to equity ratio of 1.02. While no doubt that its ROE is impressive, we would have been even more impressed had the company achieved this with lower debt. Debt increases risk and reduces options for the company in the future, so you generally want to see some good returns from using it. \n Summary \n Return on equity is useful for comparing the quality of different businesses. A company that can achieve a high return on equity without debt could be considered a high quality business. If two companies have around the same level of debt to equity, and one has a higher ROE, I'd generally prefer the one with higher ROE. \n Having said that, while ROE is a useful indicator of business quality, you'll have to look at a whole range of factors to determine the right price to buy a stock. It is important to consider other factors, such as future profit growth -- and how much investment is required going forward. So you might want to take a peek at this data-rich interactive graph of forecasts for the company. \n Of course Talen Energy may not be the best stock to buy. So you may wish to see this free collection of other companies that have high ROE and low debt. \nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2472454555"}