Promotora y Operadora de Infraestructura, S. A. B. de C. V.'s (BMV:PINFRA) Has Had A Decent Run On The Stock market: Are Fundamentals In The Driver's Seat?

Promotora y Operadora de Infraestructura S. A. B. de C. V's (BMV:PINFRA) stock is up by 5.8% over the past three months. As most would know, long-term fundamentals have a strong correlation with market price movements, 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. Particularly, we will be paying attention to Promotora y Operadora de Infraestructura S. A. B. de C. V's ROE today.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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

16% = Mex$11b ÷ Mex$67b (Based on the trailing twelve months to March 2025).

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$0.16.

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

Why Is ROE Important For Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. 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. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.

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

On the face of it, Promotora y Operadora de Infraestructura S. A. B. de C. V's ROE is not much to talk about. Yet, a closer study shows that the company's ROE is similar to the industry average of 16%. Having said that, Promotora y Operadora de Infraestructura S. A. B. de C. V has shown a modest net income growth of 19% over the past five years. Considering the moderately low ROE, it is quite possible that there might be some other aspects that are positively influencing the company's earnings 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.

As a next step, we compared Promotora y Operadora de Infraestructura S. A. B. de C. V's net income growth with the industry and found that the company has a similar growth figure when compared with the industry average growth rate of 20% in the same period.

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. Is PINFRA * fairly valued? This infographic on the company's intrinsic value has everything you need to know.

Is Promotora y Operadora de Infraestructura S. A. B. de C. V Making Efficient Use Of Its Profits?

With a three-year median payout ratio of 38% (implying that the company retains 62% of its profits), it seems that Promotora y Operadora de Infraestructura S. A. B. de C. V is reinvesting efficiently in a way that it sees respectable amount growth in its earnings and pays a dividend that's well covered.

Moreover, Promotora y Operadora de Infraestructura S. A. B. de C. V is determined to keep sharing its profits with shareholders which we infer from its long history of nine years of paying a dividend. Our latest analyst data shows that the future payout ratio of the company over the next three years is expected to be approximately 38%. Still, forecasts suggest that Promotora y Operadora de Infraestructura S. A. B. de C. V's future ROE will drop to 13% even though the the company's payout ratio is not expected to change by much.

Conclusion

On the whole, we do feel that Promotora y Operadora de Infraestructura S. A. B. de C. V has some positive attributes. 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. 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.