Boasting A 23% Return On Equity, Is GE HealthCare Technologies Inc. (NASDAQ:GEHC) A Top Quality Stock?

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. By way of learning-by-doing, we’ll look at ROE to gain a better understanding of GE HealthCare Technologies Inc. (NASDAQ:GEHC).

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. Put another way, it reveals the company’s success at turning shareholder investments into profits.

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ROE can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

So, based on the above formula, the ROE for GE HealthCare Technologies is:

23% = US$2.3b ÷ US$10.0b (Based on the trailing twelve months to June 2025).

The ‘return’ is the amount earned after tax over the last twelve months. Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.23 in profit.

View our latest analysis for GE HealthCare Technologies

Arguably the easiest way to assess company’s ROE is to compare it with the average in its industry. However, this method is only useful as a rough check, because companies do differ quite a bit within the same industry classification. As you can see in the graphic below, GE HealthCare Technologies has a higher ROE than the average (11%) in the Medical Equipment industry.

That’s what we like to see. However, bear in mind that a high ROE doesn’t necessarily indicate efficient profit generation. A higher proportion of debt in a company’s capital structure may also result in a high ROE, where the high debt levels could be a huge risk .

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.

GE HealthCare Technologies clearly uses a high amount of debt to boost returns, as it has a debt to equity ratio of 1.03. While no doubt that its ROE is impressive, we would have been even more impressed had the company achieved this with lower debt. Debt does bring extra risk, so it’s only really worthwhile when a company generates some decent returns from it.