Markets & Finance

Getting the Most Bang for the Equity Buck


By David Braverman

Return on equity measures how much in earnings a company generates in four quarters compared to its shareholders' equity, as a percentage. For example, if a company made $1 million in the past year and has shareholders' equity of $10 million, then the ROE is 10%.

In effect, return on equity is a measurement of capital efficiency. It tells investors whether funds invested in the company through retained earnings and issuance of new shares

are getting a favorable return.

The following nine stocks are in the S&P 500 and have a

return on equity of at least 30% for each of the last three

years.

Abbott Labs (ABT)

Colgate Palmolive (CL)

Dell Computer (DELL)

Equifax (EFX)

Kellogg (K)

Lexmark (LXK)

Ralston Purina (RAL)

Tupperware (TUP)

USA Education (SLM)

David Braverman is a senior investment officer with Standard & Poor's


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