With its stock down 9.1% over the past month, it is easy to disregard Fresenius Medical Care (ETR:FME). We decided to study the company’s financials to determine if the downtrend will continue as the long-term performance of a company usually dictates market outcomes. Particularly, we will be paying attention to Fresenius Medical Care’s ROE today.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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How To Calculate Return On Equity?

Return on equity 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 Fresenius Medical Care is:

5.2% = €812m ÷ €16b (Based on the trailing twelve months to March 2025).

The ‘return’ is the amount earned after tax over the last twelve months. So, this means that for every €1 of its shareholder’s investments, the company generates a profit of €0.05.

Check out our latest analysis for Fresenius Medical Care

What Has ROE Got To Do With Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. Based on how much of its profits the company chooses to reinvest or “retain”, we are then able to evaluate a company’s future ability to generate profits. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.

A Side By Side comparison of Fresenius Medical Care’s Earnings Growth And 5.2% ROE

When you first look at it, Fresenius Medical Care’s ROE doesn’t look that attractive. However, given that the company’s ROE is similar to the average industry ROE of 5.1%, we may spare it some thought. But Fresenius Medical Care saw a five year net income decline of 21% over the past five years. Bear in mind, the company does have a slightly low ROE. Hence, this goes some way in explaining the shrinking earnings.

However, when we compared Fresenius Medical Care’s growth with the industry we found that while the company’s earnings have been shrinking, the industry has seen an earnings growth of 16% in the same period. This is quite worrisome.

XTRA:FME Past Earnings Growth June 22nd 2025

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It’s important for an investor to know whether the market has priced in the company’s expected earnings growth (or decline). By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is Fresenius Medical Care fairly valued compared to other companies? These 3 valuation measures might help you decide.