Should You Be Excited About Canadian National Railway Company's (TSE:CNR) 28% Return On Equity?

Simply Wall St.12-12

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-canadian-national-railway-companys-171511061.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":"EQR","symbol_name":"资产住宅公司","start_time":0,"source_url":"https://finance.yahoo.com/news/excited-canadian-national-railway-companys-171511061.html","article_id":"2490893122","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/Khge3tLQn1LkSJOfEzgCcQ--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/3b2b38d3f6e8d2a909f30af14aecedb0"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2490893122","pubTimestamp":1733937311,"columns":[],"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. We'll use ROE to examine Canadian National Railway Company , by way of a worked example.Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Put another way, it reveals the company's success at turning shareholder investments into profits.Check out our latest analysis for Canadian National Railway. Return on Equity = Net Profit  ÷ Shareholders' Equity. So, based on the above formula, the ROE for Canadian National Railway is:. Does Canadian National Railway Have A Good ROE?Combining Canadian National Railway's Debt And Its 28% Return On Equity. Return on equity is useful for comparing the quality of different businesses. In our books, the highest quality companies have high return on equity, despite low debt. If two companies have around the same","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"EQR":"资产住宅公司","TSE":"Trinseo","BK4215":"住宅房地产投资信托","BK4585":"ETF&股票定投概念","BK4090":"商品化工","CNI":"加拿大国家铁路","BK4588":"碎股","BK4016":"铁路","ROE":"ASTORIA US QUALITY KINGS ETF"},"translate_title":"您应该对加拿大国家铁路公司(TSE：CNR)28%的股本回报率感到兴奋吗？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"CNI":1,"EQR":1,"ROE":1,"TSE":1},"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 Canadian National Railway Company (TSE:CNR), by way of a worked example. \n Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Put another way, it reveals the company's success at turning shareholder investments into profits. \n Check out our latest analysis for Canadian National Railway \n How Do You Calculate Return On Equity? \n The formula for ROE is: \n Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity \nSo, based on the above formula, the ROE for Canadian National Railway is:\n28% = CA$5.4b ÷ CA$19b (Based on the trailing twelve months to September 2024).\n The 'return' is the yearly profit. One way to conceptualize this is that for each CA$1 of shareholders' capital it has, the company made CA$0.28 in profit. \n Does Canadian National Railway Have A Good ROE? \n By comparing a company's ROE with its industry average, we can get a quick measure of how good it is. However, this method is only useful as a rough check, because companies do differ quite a bit within the same industry classification. Pleasingly, Canadian National Railway has a superior ROE than the average (15%) in the Transportation industry. \n\n\n\n  TSX:CNR Return on Equity December 11th 2024\n \n\n That's what we like to see. However, bear in mind that a high ROE doesn’t necessarily indicate efficient profit generation. Aside from changes in net income, a high ROE can also be the outcome of high debt relative to equity, which indicates risk. \n How Does Debt Impact ROE? \n Most companies need money -- from somewhere -- to grow their profits. The cash for investment can come from prior year profits (retained earnings), issuing new shares, or borrowing. In the case of the first and second options, the ROE will reflect this use of cash, for growth. In the latter case, the debt required for growth will boost returns, but will not impact the shareholders' equity. That will make the ROE look better than if no debt was used. \n Combining Canadian National Railway's Debt And Its 28% Return On Equity \n It's worth noting the high use of debt by Canadian National Railway, leading to its debt to equity ratio of 1.06. Its ROE is pretty impressive but, it would have probably been lower without the use of 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 Conclusion \n Return on equity is useful for comparing the quality of different businesses. In our books, the highest quality companies have high return on equity, despite low debt. 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 But ROE is just one piece of a bigger puzzle, since high quality businesses often trade on high multiples of earnings. 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 If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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. 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