Return on shareholder's equity - where'd it go?

I’ve been thumbing through my AmEx Annual Report, and they say last year their return on shareholder’s equity over the last year was 25.3%. I take this to mean that every $1.00 i gave them a year ago (in the form of stock purchased) is worth $1.253 today. I know that the stock price is a function of supply and demand and is not directly linked to the company’s performance, but where does this money go? The dividend is a pittance (about 1%), and the stock price has declined in the last year…

There’s a bit of a definition problem. ROE = Earnings/Shareholders Equity. Shareholders Equity isn’t really related to the share you bought or the price you paid for it. Shareholders Equity is the difference between Total Assets and Total Liabilities.

So, ROE encompases three key factors: Profitability, Asset Management, and Financial Leverage. The better the company can manage these three key factors, the better ROE will be.