So we have been recently looking at calculations for ROCE and FCF in order to derive estimates of the worth/strength of a company. What merit is there to calculation of "return on equity" i.e.
ROE = Net Income / Shareholder’s Equity
?
What kind of firms is ROE a good or bad measurement parameter, and are there certain types of firm where ROCE is a better or worse measure and so on?
And furthermore if one is designing a kind of traffic light system for the parameters on a company valuation spreadsheet, what kind of value for ROE would usually mean, "if less that x% stay away", and likewise what typical values between x% to y% would mean "possibly consider provided such-and-such criteria are met", and of course what value of z% implies "this firm is an absolute belter using this valuation parameter" etc?
thanks
M&M and apologies for yet another wall of questions!