Promotion Of Luis René Ramón And New Initiatives Will Strengthen Future Operations

Key Takeaways

• Organizational and service innovations could enhance revenue growth through better understanding customer needs and offering improved financial services.
  
• Increased dividend and buyback programs may boost stock attractiveness and contribute to earnings per share growth.
  
• Technological investments, new pricing from competitors, and exchange rate fluctuations pose risks to revenue and margins for Bolsa Mexicana de Valores.

Catalysts

Bolsa Mexicana de Valores, S.A.B. de C.V.

• The promotion of Luis René Ramón to Managing Director for commercial and marketing and the creation of a data division could help better understand customer needs and adapt product offerings, potentially driving revenue growth through a more tailored and strategic approach.
  
• The implementation of a new central counterparty service for fixed income bond clearing is expected to start operations, which could increase transaction volumes and boost revenue from clearing services.
  
• Recent amendments to Mexican securities market laws and initiatives such as the zero to Bolsa program may attract new issuers, increasing capital formation revenues from listings and maintenance fees.
  
• Planned increased investment in technology, including projects like the Evergreen initiative and the clearing house for bonds, could enhance operational efficiency and drive future revenue growth through improved service offerings.
  
• The decision to increase the dividend and share buyback program to 100% of net income might support the stock's attractiveness and EPS growth, contributing to the perception of the stock's undervaluation.

Bolsa Mexicana de Valores. de Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bolsa Mexicana de Valores. de's revenue will grow by 6.5% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 39.3% today to 37.0% in 3 years time.
• Analysts expect earnings to reach MX$1.9 billion (and earnings per share of MX$3.35) by about March 2028, up from MX$1.6 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.9x on those 2028 earnings, up from 12.9x today. This future PE is greater than the current PE for the MX Capital Markets industry at 11.5x.
• Analysts expect the number of shares outstanding to decline by 1.64% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 15.13%, as per the Simply Wall St company report.

Bolsa Mexicana de Valores. de Future Earnings Per Share Growth

Risks

• Changes in economic, political, and business conditions globally or in Mexico could negatively impact Bolsa Mexicana de Valores' revenue and earnings.
  
• New pricing structures from competitors may erode market share and put downward pressure on revenue from transactional businesses.
  
• Technological investments and upgrades may lead to increased expenses, affecting net margins unless offset by sufficient revenue growth.
  
• Regulatory delays or challenges in implementing new services, such as bond clearing, could impact expected revenue growth opportunities.
  
• Fluctuations in the exchange rate, particularly the depreciation of the Mexican peso, can affect earnings and financial results due to exposure to foreign exchange volatility.

Valuation

• The analysts have a consensus price target of MX$38.667 for Bolsa Mexicana de Valores. de based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of MX$43.0, and the most bearish reporting a price target of just MX$36.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be MX$5.0 billion, earnings will come to MX$1.9 billion, and it would be trading on a PE ratio of 16.9x, assuming you use a discount rate of 15.1%.
• Given the current share price of MX$37.82, the analyst price target of MX$38.67 is 2.2% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.