Grupo Aeroportuario del Sureste, S. A. B. de C. V.'s (BMV:ASURB) Stock's On An Uptrend: Are Strong Financials Guiding The Market?

Grupo Aeroportuario del Sureste S. A. B. de C. V's (BMV:ASURB) stock is up by a considerable 5.2% over the past month. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. Specifically, we decided to study Grupo Aeroportuario del Sureste S. A. B. de C. V's ROE in this article.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

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

How Is ROE Calculated?

The formula for return on equity 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$12b ÷ Mex$53b (Based on the trailing twelve months to June 2024).

The 'return' refers to a company's earnings over the last year. So, this means that for every MX$1 of its shareholder's investments, the company generates a profit of MX$0.23.

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. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. 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.

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

To start with, Grupo Aeroportuario del Sureste S. A. B. de C. V's ROE looks acceptable. Further, the company's ROE is similar to the industry average of 23%. Consequently, this likely laid the ground for the impressive net income growth of 25% seen over the past five years by Grupo Aeroportuario del Sureste S. A. B. de C. V. We reckon that there could also be other factors at play here. Such as - high earnings retention or an efficient management in place.

We then performed a comparison between Grupo Aeroportuario del Sureste S. A. B. de C. V's net income growth with the industry, which revealed that the company's growth is similar to the average industry growth of 21% in the same 5-year period.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. 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 ASUR B? You can find out in our latest intrinsic value infographic research report.

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 63% over the next three years. Despite the higher expected payout ratio, the company's ROE is not expected to change by much.

Conclusion

Overall, we are quite pleased with Grupo Aeroportuario del Sureste S. A. B. de C. V's performance. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. That being so, a study of the latest analyst forecasts show that the company is expected to see a slowdown in its future earnings growth. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts 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.