Promotora y Operadora de Infraestructura, S. A. B. de C. V. (BMV:PINFRA) Stock's Been Sliding But Fundamentals Look Decent: Will The Market Correct The Share Price In The Future?

Promotora y Operadora de Infraestructura S. A. B. de C. V (BMV:PINFRA) has had a rough month with its share price down 5.0%. However, the company's fundamentals look pretty decent, and long-term financials are usually aligned with future market price movements. In this article, we decided to focus on Promotora y Operadora de Infraestructura S. A. B. de C. V's ROE.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. Put another way, it reveals the company's success at turning shareholder investments into profits.

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How To Calculate Return On Equity?

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 Promotora y Operadora de Infraestructura S. A. B. de C. V is:

16% = Mex$11b ÷ Mex$68b (Based on the trailing twelve months to June 2025).

The 'return' is the profit over the last twelve months. Another way to think of that is that for every MX$1 worth of equity, the company was able to earn MX$0.16 in profit.

View our latest analysis for Promotora y Operadora de Infraestructura S. A. B. de C. V

Why Is ROE Important For 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 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 Promotora y Operadora de Infraestructura S. A. B. de C. V's Earnings Growth And 16% ROE

At first glance, Promotora y Operadora de Infraestructura S. A. B. de C. V's ROE doesn't look very promising. Yet, a closer study shows that the company's ROE is similar to the industry average of 15%. Looking at Promotora y Operadora de Infraestructura S. A. B. de C. V's exceptional 21% five-year net income growth in particular, we are definitely impressed. Given the slightly low ROE, it is likely that there could be some other aspects that are driving this growth. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio.

Next, on comparing Promotora y Operadora de Infraestructura S. A. B. de C. V's net income growth with the industry, we found that the company's reported growth is similar to the industry average growth rate of 20% over the last few years.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. What is PINFRA * worth today? The intrinsic value infographic in our free research report helps visualize whether PINFRA * is currently mispriced by the market.

Is Promotora y Operadora de Infraestructura S. A. B. de C. V Efficiently Re-investing Its Profits?

Promotora y Operadora de Infraestructura S. A. B. de C. V has a three-year median payout ratio of 35% (where it is retaining 65% of its income) which is not too low or not too high. So it seems that Promotora y Operadora de Infraestructura S. A. B. de C. V is reinvesting efficiently in a way that it sees impressive growth in its earnings (discussed above) and pays a dividend that's well covered.

Additionally, Promotora y Operadora de Infraestructura 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. Based on the latest analysts' estimates, we found that the company's future payout ratio over the next three years is expected to hold steady at 31%. Regardless, Promotora y Operadora de Infraestructura S. A. B. de C. V's ROE is speculated to decline to 13% despite there being no anticipated change in its payout ratio.

Summary

In total, it does look like Promotora y Operadora de Infraestructura S. A. B. de C. V has some positive aspects to its business. Even in spite of the low rate of return, the company has posted impressive earnings growth as a result of reinvesting heavily into its business. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. 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.