Why ROE Varies by Industry
ROE is shaped by capital intensity, business model, and competitive dynamics. Asset-light businesses (software, financial services) naturally produce higher ROE. Capital-intensive businesses (manufacturing, utilities) have structurally lower ROE — but that doesn't mean they are destroying value if their cost of equity is also lower.
ROE Benchmarks by Industry (2024–2025)
| Industry | Median ROE | Notes |
|---|---|---|
| Software / SaaS | 18–35% | Asset-light, high margins |
| Financial services | 10–18% | Leverage-driven ROE |
| Healthcare / Pharma | 12–22% | IP-driven margins |
| Consumer goods | 15–25% | Brand moat + volume |
| Technology hardware | 15–25% | Mix of margin and turnover |
| Retail | 10–20% | Thin margins, high turnover |
| Manufacturing | 8–15% | Capital-intensive |
| Real estate | 5–12% | Asset-heavy |
| Utilities | 8–12% | Regulated, stable |
| Early-stage startups | Negative to N/A | Pre-profit |
How to Use Industry Benchmarks
A 12% ROE for a software company is underperforming; a 12% ROE for a utility is strong. Always contextualize against:
- Your industry median ROE
- Your cost of equity (CAPM-based estimate)
- Historical ROE trend (improving or declining?)
- Competitor ROE (are you above or below peers?)
A company with ROE > cost of equity is creating value. ROE < cost of equity destroys shareholder value even if the business is nominally "profitable."
Calculate your ROE and compare to these benchmarks at the Return on Equity Calculator.