CompanyGraph
Use to find companies where this pattern is active.
Three observations align: return on equity is high relative to gross margin, revenue has grown for three consecutive years, and the company has been profitable for five years. Together they describe strong equity returns in a stable, growing context.
State
High ROE-to-margin ratio in a growing, profitable business
Emergence
TTM return on equity is high relative to gross margin in a business with three years of revenue growth and five years of sustained profitability. The combination describes a company generating strong equity returns per unit of gross profit retained, with the surrounding context (top-line growth and durable profitability) ruling out one-off effects.
Limits
This interpretation identifies a high ROE-to-margin ratio in a growing, profitable context. It does not assess whether the absolute ROE level is high or low, predict future trajectories, or distinguish whether returns are driven by operations or financial leverage (high leverage inflates ROE without changing gross margin).
Explanation
Each observation represents an independent observation: Return on Equity Relative to Gross Margin captures the ratio of TTM ROE to gross margin. A high ratio means the company is generating strong equity returns per unit of gross profit — through cost discipline, asset turnover, tax efficiency, or financial leverage. The observation is a snapshot ratio, not a change measure. Revenue Growing 3y confirms the top line is expanding. Revenue growth provides context — a high ROE-to-margin ratio in a growing business reflects operational dynamics, not shrinking denominators. Profitable 5y confirms sustained profitability over a longer window. Five years of consistent earnings establishes that the high ROE ratio is happening in a structurally profitable business, not a volatile one. When all three align, they describe strong equity returns grounded in stability — a high ratio in a healthy business context.
Interpretation
This interpretation identifies return evolution, not investment merit. It does not assess absolute return levels, predict trajectory continuation, or distinguish between operational and financial leverage effects on ROE.
Required Observations
All Years Increased Income 3y
Revenue grew year-over-year in each of the last 3 fiscal years
All Years Positive Income 5y
Net income was positive in each of the last N fiscal years
Roe Change
Return on equity is high relative to gross margin