Grupo Aeroportuario del Sureste, S. A. B. de C. V.'s (BMV:ASURB) Fundamentals Look Pretty Strong: Could The Market Be Wrong About The Stock?

With its stock down 1.7% over the past three months, it is easy to disregard Grupo Aeroportuario del Sureste S. A. B. de C. V (BMV:ASURB). However, a closer look at its sound financials might cause you to think again. Given that fundamentals usually drive long-term market outcomes, the company is worth looking at. Particularly, we will be paying attention to Grupo Aeroportuario del Sureste S. A. B. de C. V's ROE today.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

See our latest analysis for Grupo Aeroportuario del Sureste S. A. B. de C. V

How Do You Calculate Return On Equity?

The formula for ROE is:

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

So, based on the above formula, the ROE for Grupo Aeroportuario del Sureste S. A. B. de C. V is:

23% = Mex$13b ÷ Mex$58b (Based on the trailing twelve months to September 2024).

The 'return' is the profit over the last twelve months. One way to conceptualize this is that for each MX$1 of shareholders' capital it has, the company made MX$0.23 in profit.

What Has ROE Got To Do With Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.

A Side By Side comparison of Grupo Aeroportuario del Sureste S. A. B. de C. V's Earnings Growth And 23% ROE

To begin with, Grupo Aeroportuario del Sureste S. A. B. de C. V seems to have a respectable ROE. Further, the company's ROE is similar to the industry average of 23%. This certainly adds some context to Grupo Aeroportuario del Sureste S. A. B. de C. V's exceptional 27% net income growth seen over the past five years. However, there could also be other drivers behind this growth. For instance, the company has a low payout ratio or is being managed efficiently.

As a next step, we compared Grupo Aeroportuario del Sureste S. A. B. de C. V's net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 22%.

Earnings growth is an important metric to consider when valuing a stock. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). This then helps them determine if the stock is placed for a bright or bleak future. If you're wondering about Grupo Aeroportuario del Sureste S. A. B. de C. V's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Grupo Aeroportuario del Sureste S. A. B. de C. V Using Its Retained Earnings Effectively?

Grupo Aeroportuario del Sureste S. A. B. de C. V has a three-year median payout ratio of 30% (where it is retaining 70% of its income) which is not too low or not too high. This suggests that its dividend is well covered, and given the high growth we discussed above, it looks like Grupo Aeroportuario del Sureste S. A. B. de C. V is reinvesting its earnings efficiently.

Additionally, Grupo Aeroportuario del Sureste S. A. B. de C. V has paid dividends over a period of at least ten years which means that the company is pretty serious about sharing its profits with shareholders. Upon studying the latest analysts' consensus data, we found that the company's future payout ratio is expected to rise to 56% over the next three years. However, the company's ROE is not expected to change by much despite the higher expected payout ratio.

Conclusion

On the whole, we feel that Grupo Aeroportuario del Sureste S. A. B. de C. V's performance has been quite good. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. Unsurprisingly, this has led to an impressive earnings growth. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.

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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.