Most readers already know Coca-Cola FEMSA. The stock of de (NYSE: KOF) has risen significantly 11% over the past month. Given the company’s impressive performance, we decided to take a closer look at its financial metrics, as a company’s long-term financial health usually dictates market results. In this article, we have decided to focus on Coca-Cola FEMSA. by ROE.
Return on equity or ROE is a test of how effectively a company increases its value and manages investor money. Simply put, it is used to assess a company’s profitability against its equity.
Check out our latest review for Coca-Cola FEMSA. of
How to calculate return on equity?
the return on equity formula is:
Return on equity = Net income (from continuing operations) ÷ Equity
So, based on the above formula, the ROE of Coca-Cola FEMSA. from is:
11% = Mex 14 billion ÷ Mex 123 billion (based on the last twelve months up to September 2021).
The “return” is the amount earned after tax over the past twelve months. One way to conceptualize this is that for every $ 1 of shareholder capital it has, the company made a profit of $ 0.11.
Why is ROE important for profit growth?
We have already established that ROE is an effective indicator of profit generation for a company’s future profits. Based on the portion of its profits that the company chooses to reinvest or “keep”, we are then able to assess a company’s future ability to generate profits. Generally speaking, all other things being equal, companies with high return on equity and high profit retention have a higher growth rate than companies that do not share these attributes.
Coca Cola FEMSA. Profit growth of and 11% ROE
At first glance, Coca-Cola FEMSA. de seems to have a decent ROE. Additionally, the company’s ROE is similar to the industry average of 9.6%. This probably partly explains Coca-Cola FEMSA. de is a moderate growth of 16% over the past five years, among other factors.
Then, comparing with the industry’s net income growth, we found that Coca-Cola FEMSA. The growth of de is quite high compared to the industry’s average growth of 13% over the same period, which is great to see.
Profit growth is an important metric to consider when valuing a stock. It is important for an investor to know whether the market has factored in the expected growth (or decline) in company earnings. This then helps them determine whether the stock is set for a bright or dark future. Is the KOF correctly valued? This intrinsic business value infographic has everything you need to know.
Does Coca-Cola FEMSA. to make efficient use of its profits?
Coca Cola FEMSA. de has a significant three-year median payout ratio of 84%, which means he only has 16% left to reinvest in his business. This implies that the company has been able to achieve decent profit growth despite returning most of its profits to shareholders.
In addition, Coca-Cola FEMSA. of paying dividends for at least ten years or more. This shows that the company is committed to sharing the profits with its shareholders. Based on the latest analyst estimates, we found that the company’s future payout ratio over the next three years is expected to hold steady at 71%. Regardless, the future ROE of Coca-Cola FEMSA. de is expected to increase to 16% although there is not much expected change in its payout ratio.
Overall, we feel that Coca-Cola FEMSA. de’s performance was quite good. We are particularly impressed with the considerable profit growth displayed by the company, which has likely been supported by its high ROE. Although the company pays out most of its profits as dividends, it was able to increase its profits despite this, so this is probably a good sign. However, a study of the latest analysts’ forecasts shows that the company is likely to experience a slowdown in future earnings growth. To learn more about the latest analyst forecast for the business, check out this visualization of the analyst forecast for the business.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.