Investment Q&A

The number is correct, the reason for this obscene number is because DOL has operated with a negative book value (negative shareholder equity), as the company consistently repurchased shares over the years and the repurchased price was higher than the stock issues price in the past (just accounting record, as the company grew significantly over the years). With buybacks, DOL's equity base is thus very low ($28M now) and thus since it is still profitable ROE is very high. DOL has even had negative equity in the past. ROEs may not be an appropriate metric to evaluate a business like DOL, we think Return on Invested Capital (debt + equity) is a better one. Bloomberg tries to adjust for all of this, and quotes an 'adjusted normalized' ROE of 18%. 

Great businesses are the ones that do not need equity capital. Investors can also look at balance sheet of companies such as MCD, HD, and LOW.