Yahoo Finance Grupo Aeroportuario del Sureste, S. A. B. de C. V.'s (NYSE:ASR) Stock Has Shown A Decent Performance: Have Financials A Role To Play?
Most readers would already know that Grupo Aeroportuario del Sureste S. A. B. de C. V's (NYSE:ASR) stock increased by 4.5% over the past month. 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. In this article, we decided to focus on Grupo Aeroportuario del Sureste 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. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.
See our latest analysis for Grupo Aeroportuario del Sureste S. A. B. de C. V
How Is ROE Calculated?
ROE can be calculated by using the formula:
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:
16% = Mex$7.7b ÷ Mex$48b (Based on the trailing twelve months to March 2022).
The 'return' is the income the business earned over the last year. So, this means that for every $1 of its shareholder's investments, the company generates a profit of $0.16.
What Is The Relationship Between ROE And Earnings Growth?
So far, we've learned that ROE is a measure of a company's profitability. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. 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 Grupo Aeroportuario del Sureste S. A. B. de C. V's Earnings Growth And 16% ROE
To start with, Grupo Aeroportuario del Sureste S. A. B. de C. V's ROE looks acceptable. Even when compared to the industry average of 15% the company's ROE looks quite decent. However, while Grupo Aeroportuario del Sureste S. A. B. de C. V has a pretty respectable ROE, its five year net income decline rate was 4.1% . So, there might be some other aspects that could explain this. Such as, the company pays out a huge portion of its earnings as dividends, or is faced with competitive pressures.
That being said, we compared Grupo Aeroportuario del Sureste S. A. B. de C. V's performance with the industry and were concerned when we found that while the company has shrunk its earnings, the industry has grown its earnings at a rate of 23% in the same period.
Earnings growth is a huge factor in stock valuation. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). This then helps them determine if the stock is placed for a bright or bleak future. Is Grupo Aeroportuario del Sureste S. A. B. de C. V fairly valued compared to other companies? These 3 valuation measures might help you decide.
Is Grupo Aeroportuario del Sureste S. A. B. de C. V Efficiently Re-investing Its Profits?
While the company did payout a portion of its dividend in the past, it currently doesn't pay a dividend. This implies that potentially all of its profits are being reinvested in the business.
Our latest analyst data shows that the future payout ratio of the company is expected to rise to 71% over the next three years. However, the company's ROE is not expected to change by much despite the higher expected payout ratio.
Conclusion
Overall, we feel that Grupo Aeroportuario del Sureste S. A. B. de C. V certainly does have some positive factors to consider. However, given the high ROE and high profit retention, we would expect the company to be delivering strong earnings growth, but that isn't the case here. This suggests that there might be some external threat to the business, that's hampering its growth. With that said, we studied the latest analyst forecasts and found that while the company has shrunk its earnings in the past, analysts expect its earnings to grow in the future. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.
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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.
