<div id="readability-page-1"><div><p>Many investors are still learning about the various metrics that can be useful when analysing a stock. This article is for those who would like to learn about Return On Equity (ROE).  By way of learning-by-doing, we'll look at ROE to gain a better understanding of GDS Holdings Limited (NASDAQ:GDS).</p><p> ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders.  Simply put, it is used to assess the profitability of a company in relation to its equity capital. </p><p>We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.</p><h2> How Is ROE Calculated? </h2><p> <strong>Return on equity can be calculated by using the formula:</strong> </p><p> Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity </p><p>So, based on the above formula, the ROE for GDS Holdings is:</p><p>4.7% = CN¥1.2b ÷ CN¥27b (Based on the trailing twelve months to September 2025).</p><p> The 'return' is the income the business earned over the last year.  That means that for every $1 worth of shareholders' equity, the company generated $0.05 in profit. </p><p><span> Check out our latest analysis for GDS Holdings </span></p> <h2> Does GDS Holdings Have A Good ROE? </h2><p> One simple way to determine if a company has a good return on equity is to compare it to the average for its industry.  The limitation of this approach is that some companies are quite different from others, even within the same industry classification.   As shown in the graphic below, GDS Holdings has a lower ROE than the average (11%) in the IT industry classification.  </p><figure><img height="632" src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/403751487-roe-1-dark-2/1767003609284?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="666" original-src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/403751487-roe-1-dark-2/1767003609284"/><figcaption>NasdaqGM:GDS Return on Equity December 29th 2025</figcaption></figure><p> That certainly isn't ideal.    However, a low ROE is not always bad. If the company's debt levels are moderate to low, then there's still a chance that returns can be improved via the use of financial leverage.  A high debt company having a low ROE is a different story altogether and a risky investment in our books.    Our risks dashboard should have the 3 risks we have identified for GDS Holdings.   </p><h2> How Does Debt Impact Return On Equity? </h2><p> Virtually all companies need money to invest in the business, to grow profits.  That cash can come from issuing shares, retained earnings, or debt.  In the first two cases, the ROE will capture this use of capital to grow.  In the latter case, the debt required for growth will boost returns, but will not impact the shareholders' equity.  In this manner the use of debt will boost ROE, even though the core economics of the business stay the same. </p><h2> GDS Holdings' Debt And Its 4.7% ROE </h2><p> It's worth noting the high use of debt by GDS Holdings, leading to its debt to equity ratio of 1.41.   The combination of a rather low ROE and significant use of debt is not particularly appealing.   Debt does bring extra risk, so it's only really worthwhile when a company generates some decent returns from it.   </p> <h2> Conclusion  </h2> <p> Return on equity is useful for comparing the quality of different businesses.  In our books, the highest quality companies have high return on equity, despite low debt.  All else being equal, a higher ROE is better. </p><p> Having said that, while ROE is a useful indicator of business quality, you'll have to look at a whole range of factors to determine the right price to buy a stock.  It is important to consider other factors, such as future profit growth -- and how much investment is required going forward.   So you might want to check this FREE visualization of analyst forecasts for the company. </p><p> But note: <strong>GDS Holdings may not be the best stock to buy</strong>. So take a peek at this <strong>free</strong> list of interesting companies with high ROE and low debt. </p><div><p>Mobile Infrastructure for Defense and Disaster</p><p>The next wave in robotics isn't humanoid. Its fully autonomous towers delivering 5G, ISR, and radar in under 30 minutes, anywhere.</p><p>Get the investor briefing before the next round of contracts</p><p><span>Sponsored On Behalf of CiTech</span></p></div></div></div>

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<p>GDS Holdings Limited (NASDAQ:GDS) has a Return on Equity (ROE) of 4.7%, which is below the IT industry average of 11%. This low ROE, combined with a high debt-to-equity ratio of 1.41, raises concerns about the company's financial health. While ROE is a useful metric for assessing profitability relative to shareholder equity, it is important to consider other factors such as future profit growth and investment needs. Overall, GDS Holdings may not be the best investment choice at this time.</p>

Should You Be Concerned About GDS Holdings Limited's (NASDAQ:GDS) ROE?