Is the latest stock performance of Quálitas Controladora, SAB de CV (BMV:Q) driven by its strong fundamentals?

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Qualitas Controladora. of (BMV:Q) has risen 5.2% over the past three months. Given its impressive performance, we decided to study the company’s key financial indicators, as a company’s long-term fundamentals usually dictate market outcomes. In this article, we have decided to focus on Qualitas Controladora. ROE of of.

ROE or return on equity is a useful tool for evaluating how effectively a company can generate returns on the investment it has received from its shareholders. In simpler terms, it measures a company’s profitability relative to equity.

Check out our latest review for Qualitas Controladora. of

How to calculate return on equity?

the return on equity formula East:

Return on equity = Net income (from continuing operations) ÷ Equity

So, based on the above formula, the ROE for Quálitas Controladora. of is:

19% = 3.8 billion Mexican dollars ÷ 20 billion Mexican dollars (based on the last twelve months until December 2021).

The “yield” is the profit of the last twelve months. Another way to think about this is that for every MX$1 worth of equity, the company was able to make a profit of MX$0.19.

What does ROE have to do with earnings growth?

We have already established that ROE serves as an effective profit-generating indicator for a company’s future earnings. Depending on how much of those earnings the company reinvests or “keeps”, and how efficiently it does so, we are then able to gauge a company’s earnings growth potential. Assuming everything else remains unchanged, the higher the ROE and earnings retention, the higher a company’s growth rate compared to companies that don’t necessarily exhibit these characteristics.

Qualitas Controladora. Earnings growth and ROE of 19%

At first glance, Qualitas Controladora. de seems to have a decent ROE. Compared to the industry average ROE of 13%, the company’s ROE looks quite remarkable. It certainly adds some context to Quálitas Controladora. exceptional growth of 29% in net income over the last five years. However, there could also be other causes behind this growth. For example, it is possible that the management of the company has made good strategic decisions or that the company has a low payout ratio.

We then compared Qualitas Controladora. growth in net income with the industry and we are happy to see that the growth figure for the company is higher compared to the industry which has a growth rate of 7.4% over the same period .

BMV:Q * Past Earnings Growth March 29, 2022

Earnings growth is an important factor in stock valuation. What investors then need to determine is whether the expected earnings growth, or lack thereof, is already priced into the stock price. By doing so, they will get an idea if the stock is headed for clear blue waters or if swampy waters are waiting. What is Q* worth today? The intrinsic value infographic in our free research report visualizes whether Q* is currently mispriced by the market.

Is Qualitas Controladora. to effectively use its retained earnings?

Qualitas Controladora. The three-year median payout ratio of de is less than 15%, which means that it retains a higher percentage (85%) of its profits. So it looks like Qualitas Controladora. of massively reinvests its earnings to grow its business, which is reflected in the growth of its earnings.

In addition, Qualitas Controladora. de has paid dividends over a nine-year period, which means the company is pretty serious about sharing its profits with shareholders. Looking at current analyst consensus data, we can see that the company’s future payout ratio is expected to reach 43% over the next three years. However, the company’s ROE is not expected to change much despite the higher expected payout ratio.

Summary

Overall, we are quite satisfied with Qualitas Controladora. the performance of of. In particular, we appreciate the fact that the company is reinvesting heavily in its business, and at a high rate of return. Unsurprisingly, this led to impressive earnings growth. That said, a study of the latest analyst forecasts shows that the company should see a slowdown in future earnings growth. Are these analyst expectations based on general industry expectations or company fundamentals? Click here to access our analyst forecast page for the company.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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