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Should You Be Worried About Synthetica AD's (BUL:SYN) 6.9% Return On Equity?

Simply Wall St · 5d ago

While some investors are already well versed in financial metrics (hat tip), this article is for those who would like to learn about Return On Equity (ROE) and why it is important. We'll use ROE to examine Synthetica AD (BUL:SYN), by way of a worked example.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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How Do You Calculate Return On Equity?

Return on equity can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Synthetica AD is:

6.9% = лв2.4m ÷ лв34m (Based on the trailing twelve months to September 2025).

The 'return' is the yearly profit. So, this means that for every BGN1 of its shareholder's investments, the company generates a profit of BGN0.07.

See our latest analysis for Synthetica AD

Does Synthetica AD Have A Good Return On Equity?

One simple way to determine if a company has a good return on equity is to compare it to the average for its industry. Importantly, this is far from a perfect measure, because companies differ significantly within the same industry classification. As shown in the graphic below, Synthetica AD has a lower ROE than the average (8.9%) in the Medical Equipment industry classification.

roe
BUL:SYN Return on Equity January 2nd 2026

Unfortunately, that's sub-optimal. 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. To know the 4 risks we have identified for Synthetica AD visit our risks dashboard for free.

Why You Should Consider Debt When Looking At ROE

Virtually all companies need money to invest in the business, to grow profits. That cash can come from retained earnings, issuing new shares (equity), or debt. In the first and second cases, the ROE will reflect this use of cash for investment in the business. In the latter case, the debt required for growth will boost returns, but will not impact the shareholders' equity. Thus the use of debt can improve ROE, albeit along with extra risk in the case of stormy weather, metaphorically speaking.

Synthetica AD's Debt And Its 6.9% ROE

It seems that Synthetica AD uses a huge volume of debt to fund the business, since it has an extremely high debt to equity ratio of 3.55. We consider it to be a negative sign when a company has a rather low ROE despite a rather high debt to equity.

Conclusion

Return on equity is useful for comparing the quality of different businesses. Companies that can achieve high returns on equity without too much debt are generally of good quality. If two companies have the same ROE, then I would generally prefer the one with less debt.

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. Profit growth rates, versus the expectations reflected in the price of the stock, are a particularly important to consider. So I think it may be worth checking this free this detailed graph of past earnings, revenue and cash flow.

But note: Synthetica AD may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.