Profitability
Return on Assets
ROA
What it is
ROA measures the profit generated per dollar of assets held. Unlike ROE, it's not affected by leverage.
How to read it
A high ROA indicates a company able to generate lots of profit with few assets — typically software or services. Heavy industries (manufacturing, energy) have structurally lower ROAs.
Common reference points
- Excellent> 10%
- Good5 – 10%
- Average2 – 5%
- Weak< 2%
Orders of magnitude, not a rule: the same number does not mean the same thing from one sector to the next.
What it does not tell you
Like ROE, ROA is very sector-sensitive. An ROA of 3% is dismal for a software company but excellent for an automaker.
Other measures — Profitability
Educational content. Polaris is not a registered investment adviser and makes no recommendation.