Return on Equity is the measure of efficiency of the company at generating profit with respect to its net worth. A company which has high return on equity is likely to grow faster in future in comparison to one that has lesser return on equity.

It is a measure of how efficiently a company has been put its assets to use in order to generate profits. It is advisable to target companies that have RoE greater than 15%.

Net Profit Margin = Net Profit / Revenue

Net Profit Margin is the measure of how much of the company’s revenue actually translates into profit after covering all expenses, interest, tax etc.

If Company A has higher net profit margin than Company B both belonging to the same sector, it means that the Company A is able to generate higher amount of profit wrt cost in comparison to company B . It also means that the company A has a competitive advantage over company B due to which it is able to maintain higher net profit margin.