Grupo Aeroportuario del Sureste SAB de C. V (BMV: ASURB) had a difficult three-month period with its share price falling 7.8%. It is possible that the markets ignored the various financial data of the company and decided to look into the negative sentiment. Long-term fundamentals usually determine market performance, so special attention should be paid to them. Specifically, we decided to study the ROE of Grupo Aeroportuario del Sureste SAB de C. V in this article.
ROE or return on equity is a useful tool to assess how effectively a company can generate the returns on investment it has received from its shareholders. In simpler terms, it measures a company’s profitability relative to equity.
Check out our latest analysis for Grupo Aeroportuario del Sureste SAB de C. V
How do you calculate return on equity?
The formula for ROE is:
Return on equity = Net income (from continuing operations) ÷ Equity
Thus, based on the above formula, the ROE of Grupo Aeroportuario del Sureste SAB de C. V is:
7.5% = 3.1 billion Mex ÷ 41 billion Mex (based on the last twelve months up to June 2021).
The “return” is the amount earned after tax over the past twelve months. One way to conceptualize this is that for every MX $ of shareholder capital it has, the company made MX $ 0.07 in profit.
What is the relationship between ROE and profit growth?
So far, we’ve learned that ROE measures how efficiently a business generates profits. Based on how much of those profits the company reinvests or “withholds” and how efficiently it does so, we are then able to assess a company’s profit growth potential. Generally speaking, all other things being equal, companies with high return on equity and high profit retention have a higher growth rate than companies that do not share these attributes.
A side-by-side comparison of profit growth and 7.5% ROE of Grupo Aeroportuario del Sureste SAB de CV
It is difficult to say that the ROE of Grupo Aeroportuario del Sureste SAB de C. V is very good in itself. Even compared to the industry average ROE of 9.4%, the company’s ROE is pretty dismal. Therefore, it may not be wrong to say that the 5.7% drop in five-year net profit observed by Grupo Aeroportuario del Sureste SAB de C. V was perhaps the result of lower ROE . We believe there could also be other aspects that negatively influence the company’s earnings outlook. For example, the company has misallocated capital, or the company has a very high payout rate.
In addition, even compared to the industry, which reduced its profits at a rate of 4.3% during the same period, we found that the performance of Grupo Aeroportuario del Sureste SAB de C. V is quite disappointing. because it suggests that the company has been cutting profits at a faster rate than the industry.
Profit growth is a huge factor in the valuation of stocks. It is important for an investor to know whether the market has factored in the expected growth (or decline) in company earnings. This then helps them determine whether the stock is set for a bright or dark future. Is ASUR B correctly valued? This intrinsic business value infographic has everything you need to know.
Is Grupo Aeroportuario del Sureste SAB de C. V using its profits efficiently?
Despite a normal three-year median payout rate of 44% (i.e. a retention rate of 56%), the fact that C. V’s Grupo Aeroportuario del Sureste SAB profits have declined is quite puzzling. . So there could be other factors at play here that could potentially hamper growth. For example, the company faced headwinds.
In addition, Grupo Aeroportuario del Sureste SAB de C. V has paid dividends over a period of at least ten years, which suggests that maintaining dividend payments is much more important to management, even if it is done in the past. detriment of the growth of the company. Looking at the current analyst consensus data, we can see that the company’s future payout ratio is expected to increase to 62% over the next three years. Still, forecasts suggest that the future ROE of Grupo Aeroportuario del Sureste SAB de C. V will reach 16%, although the company’s payout ratio is expected to increase. We assume that there could be other characteristics of the company that could be the source of the anticipated growth in the company’s ROE.
Overall, we have mixed feelings about Grupo Aeroportuario del Sureste SAB de CV Although the company has a high reinvestment rate, the low ROE means that not all of that reinvestment benefits its investors, and what’s more, it has a negative impact on profit growth. However, the latest forecast from industry analysts shows that analysts expect a significant improvement in the company’s earnings growth rate. To learn more about the latest analyst forecast for the business, check out this visualization of the analyst forecast for the business.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in the mentioned stocks.
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