Top Returns: Results mixed in companies' return on equity
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GlaxoSmithKline, which is based in the United Kingdom and has regional offices in Moon, saw a huge jump in its return on equity last year to 58.8, up from 17.7 a year earlier. That's the kind of gain that analysts like to see.
Return on equity, or ROE, is determined by dividing a company's net income by the average shareholder's equity. It is seen as a way to measure how effectively management deploys capital provided by shareholders.
Companies that did well on the measure in this year's rankings didn't always improve on their own performances of a year earlier, but they still offered up a pretty good argument for their use of the shareholders' money.
Two top Pittsburgh-area companies, Koppers Holdings and H.J. Heinz, saw their individual ROE drop but still took second and third place in the rankings. Koppers, based Downtown, was at 66.6 last year and 40.2 this year. H.J. Heinz fell from 55.6 to 39.6.
A higher ROE is desirable, but investors also like a company that is improving.
Downtown-based U.S. Steel did not make the list of the Top 50 companies based on its ROE because the steel company's return was in the negative numbers at -1.9. Still, that was an improvement from the -11.3 posted a year earlier.
Many regional companies produced return on equity gains without starting from a negative place. Consol Energy of Cecil saw its ROE go from 14.7 to 19.3, while II-VI of Saxonburg saw a gain from 10.5 to 17.7.
Dick's Sporting Goods, based in Findlay, improved from 14.9 to 17.6; Wilmerding's Wabtec went from 14.6 to 17.4; and Station Square-based Wesco International improved from 10.8 to 15.7.
Not everyone had to beat the previous year's results. TMS International, the Glassport parent of steel mill supplier Tube City, took fifth place with 33. It went public in 2011.
First Published March 20, 2012 12:00 am