CEMEX, S.A.B. de C.V.'s (BMV:CEMEXCPO) Stock On An Uptrend: Could Fundamentals Be Driving The Momentum?

Most readers would already be aware that CEMEX. de's (BMV:CEMEXCPO) stock increased significantly by 20% over the past three months. As most would know, fundamentals are what usually guide market price movements over the long-term, so we decided to look at the company's key financial indicators today to determine if they have any role to play in the recent price movement. Specifically, we decided to study CEMEX. de's ROE in this article.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Put another way, it reveals the company's success at turning shareholder investments into profits.

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How Is ROE Calculated?

ROE can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for CEMEX. de is:

6.6% = US$906m ÷ US$14b (Based on the trailing twelve months to June 2025).

The 'return' is the yearly profit. So, this means that for every MX$1 of its shareholder's investments, the company generates a profit of MX$0.07.

View our latest analysis for CEMEX. de

What Has ROE Got To Do With Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.

A Side By Side comparison of CEMEX. de's Earnings Growth And 6.6% ROE

It is quite clear that CEMEX. de's ROE is rather low. Further, we noted that the company's ROE is similar to the industry average of 7.9%. However, the exceptional 47% net income growth seen by CEMEX. de over the past five years is pretty remarkable. Considering the low ROE, it is quite possible that there might also be some other aspects that are positively influencing the company's earnings growth. Such as - high earnings retention or an efficient management in place.

Next, on comparing with the industry net income growth, we found that CEMEX. de's growth is quite high when compared to the industry average growth of 16% in the same period, which is great to see.

Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Has the market priced in the future outlook for CEMEX CPO? You can find out in our latest intrinsic value infographic research report.

Is CEMEX. de Making Efficient Use Of Its Profits?

CEMEX. de's significant three-year median payout ratio of 57% (where it is retaining only 43% of its income) suggests that the company has been able to achieve a high growth in earnings despite returning most of its income to shareholders.

Moreover, CEMEX. de is determined to keep sharing its profits with shareholders which we infer from its long history of six years of paying a dividend.

Conclusion

Overall, we feel that CEMEX. de certainly does have some positive factors to consider. While no doubt its earnings growth is pretty substantial, we do feel that the reinvestment rate is pretty low, meaning, the earnings growth number could have been significantly higher had the company been retaining more of its profits. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an 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 account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.