Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) Doing What It Can To Lift Shares

With a price-to-earnings (or "P/E") ratio of 13.9x Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) may be sending bullish signals at the moment, given that almost half of all companies in the United States have P/E ratios greater than 20x and even P/E's higher than 34x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

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Recent times have been advantageous for Coca-Cola FEMSA. de as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for Coca-Cola FEMSA. de

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Coca-Cola FEMSA. de.

Does Growth Match The Low P/E?

Coca-Cola FEMSA. de's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 11% last year. Pleasingly, EPS has also lifted 40% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 9.2% per annum over the next three years. That's shaping up to be similar to the 11% per annum growth forecast for the broader market.

In light of this, it's peculiar that Coca-Cola FEMSA. de's P/E sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Coca-Cola FEMSA. de's P/E

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Coca-Cola FEMSA. de currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. When we see an average earnings outlook with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with Coca-Cola FEMSA. de.

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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.