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Fundamentals scan

High ROE, Low Debt Screener

This scan finds companies with a return on equity (ROE) above 20%, debt to equity below 0.5, and a price above the 50-day moving average.

Run this scan in the live demoFree, no sign-up. The demo uses made-up sample data.

The exact rule

Type this in Chalni: roe above 20% and debt to equity below 0.5 and close above 50 day sma

  1. ROE % > 20
  2. Debt/Equity < 0.5
  3. Close > SMA(50)

Find US stocks where ROE (%) is above 20; and debt to equity is below 0.5; and the closing price is above the 50-day simple moving average.

Formula view
roe_pct > 20
AND debt_to_equity < 0.5
AND close > sma(close, 50)
Example chart: Quality: high ROE, low debtDaily candles of a made-up sample stock with 50-day SMA. The shaded day is the day the scan fired.
  • 50-day SMA
  • Shaded day: the scan fired
Example from Chalni's made-up sample market, not a real stock. It shows the most recent time this scan fired in the sample US market, picked whether or not the trade worked.

What it means

Quality investors look for businesses that earn a lot on the money they use and do not depend on borrowing. ROE above 20% means the company earns more than 20 cents a year for each dollar of shareholders' money.

Low debt keeps that return honest. High ROE can come from heavy borrowing, so the debt rule screens out companies that boost their returns that way.

How traders use it

  • A good base list for long-term investors.
  • Check that ROE has been high for several years, not just one.
  • Add a fair-price rule, such as P/E, to avoid paying too much.

Watch out for

  • Quality stocks often trade at high prices. A great company can be a poor investment at the wrong price.
  • Share buybacks can lift ROE by shrinking equity.

Test it before you trust it

Every scan in Chalni sits an exam. First it runs on older data, the practice: each time it picks a stock, the stock is held for 10 trading days and 0.2% is paid in costs. Then it runs on newer data it has never seen, the exam. A scan that only works in practice has just memorised the past.

See the practice and exam results for this scan in the demo (on sample data; real data comes at launch).

Questions

What is a good ROE?

Above 15% is often seen as good and above 20% as excellent, but it varies by industry.

What does debt to equity below 0.5 mean?

The company's debt is less than half of its shareholders' equity: a careful balance sheet.

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