Will the weakness in shares of Quálitas Controladora, SAB de CV (BMV: Q) prove temporary given strong fundamentals?
With its stock down 4.1% over the past week, it’s easy to overlook QuÃ¡litas Controladora. of (BMV: Q). However, a closer look at his strong finances might get you to think again. Since fundamentals usually determine long-term market outcomes, the business is worth considering. Specifically, we decided to study QuÃ¡litas Controladora. of ROE in this article.
Return on equity or ROE is an important factor for a shareholder to consider because it tells them how efficiently their capital is being reinvested. In short, the ROE shows the profit that each dollar generates compared to the investments of its shareholders.
Check out our latest review for QuÃ¡litas Controladora. of
How is the ROE calculated?
ROE can be calculated using the formula:
Return on equity = Net income (from continuing operations) Ã· Equity
Thus, based on the above formula, the ROE of QuÃ¡litas Controladora. from is:
28% = 5.2 billion Mex Ã· 19 billion Mex (based on the last twelve months up to June 2021).
The “return” is the income the business has earned over the past year. This therefore means that for every MX $ 1 of investments by its shareholder, the company generates a profit of MX $ 0.28.
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. We now need to assess the profits that the business is reinvesting or âwithholdingâ for future growth, which then gives us an idea of ââthe growth potential of the business. Assuming everything else remains the same, the higher the ROE and profit retention, the higher the growth rate of a business compared to businesses that don’t necessarily have these characteristics.
QuÃ¡litas Controladora. Profit growth of and 28% of ROE
To begin with, QuÃ¡litas Controladora. de has a fairly high ROE, which is interesting. Second, even compared to the industry average of 12%, the company’s ROE is quite impressive. Thus, the substantial growth in net income of 37% observed by QuÃ¡litas Controladora. of over the past five years is not too surprising.
Then we compared QuÃ¡litas Controladora. growth in net income from with the industry, and fortunately we found that the growth observed by the company is above the industry average growth of 7.3%.
Profit growth is a huge factor in the valuation of stocks. The investor should try to establish whether the expected growth or decline in earnings, as the case may be, is taken into account. This then helps him determine whether the stock is set for a bright or dark future. Q * is it correctly evaluated? This intrinsic business value infographic has everything you need to know.
Is QuÃ¡litas Controladora. to make efficient use of its profits?
QuÃ¡litas Controladora. De’s three-year median payout ratio is less than 13%, which means it keeps a higher percentage (87%) of its profits. So it appears that management is reinvesting the profits massively to grow their business, which is reflected in the profit growth figure.
In addition, QuÃ¡litas Controladora. de paid dividends over a nine-year period. This shows that the company is committed to sharing the profits with its shareholders. Our latest analyst data shows that the company’s future payout ratio is expected to reach 30% over the next three years. Consequently, the higher expected payout rate explains the drop in the company’s expected ROE (to 19%) over the same period.
Overall, we are quite satisfied with QuÃ¡litas Controladora. the performance of de. In particular, it is great to see that the company is investing heavily in its business and with a high rate of return, which has resulted in significant growth in its profits. That said, the latest forecast from industry analysts shows that the company’s earnings growth is expected to slow. Are the expectations of these analysts based on general industry expectations or on company fundamentals? Click here to go to our business analyst forecasts page.
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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 shares 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.
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