dmrktrading

> Sometimes ROE fails to predict future growth rates because the marginal ROE on new projects is quite a bit lower.

There are other issues to consider. E.g. book value of assets might be quite different from market price of them should you wish to invest in more. A more common issue is that most firms don't automatically grow nominal amount of debt as they reinvest, meaning their leverage is declining and ROE will suffer.

I think ROA is always inferior to ROIC, given that cash on balance sheets is usually mostly surplus. (However either of these allows easier cross-firm comparisons due to the leverage skewing in ROE that you point out.)

My gut feeling is that ROE (or rote or roce) is used more in financial industries where book and mkt values of assets are much closer, and in regulated subsectors you'll find leverage levels very similar across competitors.

dmrktrading

> what do people look at for balance sheet strength

Three things: credit rating, credit rating, and credit rating.

Any metric you can dream up, the agency analysts have already considered, tried, and tested for relevance to that particular sector. Don't spend time reinventing this wheel.