Are Quálitas Controladora, S.A.B. de C.V.'s (BMV:Q) Fundamentals Good Enough to Warrant Buying Given The Stock's Recent Weakness?
With its stock down 3.8% over the past week, it is easy to disregard Quálitas Controladora. de (BMV:Q). But if you pay close attention, you might find that its key financial indicators look quite decent, which could mean that the stock could potentially rise in the long-term given how markets usually reward more resilient long-term fundamentals. Particularly, we will be paying attention to Quálitas Controladora. de's ROE today.
ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. Put another way, it reveals the company's success at turning shareholder investments into profits.
How Do You 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 Quálitas Controladora. de is:
25% = Mex$6.6b ÷ Mex$26b (Based on the trailing twelve months to September 2025).
The 'return' is the profit over the last twelve months. One way to conceptualize this is that for each MX$1 of shareholders' capital it has, the company made MX$0.25 in profit.
View our latest analysis for Quálitas Controladora. de
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. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.
A Side By Side comparison of Quálitas Controladora. de's Earnings Growth And 25% ROE
To start with, Quálitas Controladora. de's ROE looks acceptable. Especially when compared to the industry average of 19% the company's ROE looks pretty impressive. However, we are curious as to how the high returns still resulted in flat growth for Quálitas Controladora. de in the past five years. Therefore, there could be some other aspects that could potentially be preventing the company from growing. Such as, the company pays out a huge portion of its earnings as dividends, or is faced with competitive pressures.
As a next step, we compared Quálitas Controladora. de's net income growth with the industry and were disappointed to see that the company's growth is lower than the industry average growth of 18% in the same period.
Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. What is Q * worth today? The intrinsic value infographic in our free research report helps visualize whether Q * is currently mispriced by the market.
Is Quálitas Controladora. de Using Its Retained Earnings Effectively?
Quálitas Controladora. de has a high three-year median payout ratio of 77% (or a retention ratio of 23%), meaning that the company is paying most of its profits as dividends to its shareholders. This does go some way in explaining why there's been no growth in its earnings.
In addition, Quálitas Controladora. de has been paying dividends over a period of at least ten years suggesting that keeping up dividend payments is way more important to the management even if it comes at the cost of business growth. Our latest analyst data shows that the future payout ratio of the company over the next three years is expected to be approximately 71%. As a result, Quálitas Controladora. de's ROE is not expected to change by much either, which we inferred from the analyst estimate of 24% for future ROE.
Summary
Overall, we feel that Quálitas Controladora. de certainly does have some positive factors to consider. Yet, the low earnings growth is a bit concerning, especially given that the company has a high rate of return. Investors could have benefitted from the high ROE, had the company been reinvesting more of its earnings. As discussed earlier, the company is retaining a small portion of its profits. With that said, the latest industry analyst forecasts reveal that the company's earnings are expected to accelerate. 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.