It varies by industry. Generally, 5%+ is solid for asset-heavy industries, 10%+ for moderate, and 15%+ for asset-light businesses. Banks typically have 1-2% ROA due to huge asset bases. Always compare to industry peers.

ROA uses total assets in the denominator; ROE uses shareholders' equity. ROE = ROA times the equity multiplier (Assets / Equity). A company with high debt will have ROE much higher than ROA. ROA shows operational efficiency; ROE shows shareholder returns including the effect of leverage.

Use ROA to gauge how well total assets generate profit, RONA (Return on Net Assets) to strip out non-operating items like cash and short-term liabilities for cleaner operational comparisons, and ROE to measure shareholder return after leverage. Asset-heavy industrials often track RONA; banks lean on ROA and ROE.

Banks operate with enormous asset bases (loans and securities) funded mostly by deposits and other liabilities. Even profitable banks typically report 1-2% ROA because the denominator is so large. FDIC quarterly reports confirm sector averages around 1%, which is why ROA for banks is benchmarked only against other banks.

DuPont splits ROA into two drivers: ROA = Net Profit Margin x Asset Turnover, where Net Margin = Net Income / Revenue and Asset Turnover = Revenue / Total Assets. Two firms can hit the same ROA via very different paths: a luxury brand with high margin and low turnover, or a discount retailer with thin margin and rapid turnover.

Highly sensitive. Damodaran's NYU sector data shows SaaS and software firms routinely posting 15-30% ROA, retailers 5-10%, manufacturers 4-8%, and banks 1-2%. Comparing ROA across sectors is misleading; always benchmark against direct peers and watch the trend across multiple years rather than a single period.

A rising ROA usually signals improving margins, better asset utilization, or asset-light restructuring. A falling ROA can indicate margin compression, capacity buildouts that have not yet generated revenue, or acquisitions that bloated the asset base. Use DuPont to isolate whether the move came from margin or turnover before drawing conclusions.

Either lift the numerator (net income) or shrink the denominator (assets). Common levers include raising profit margins through pricing or cost control, divesting underutilized assets, accelerating asset turnover via better inventory and receivables management, or outsourcing asset-intensive operations.