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Fomento Económico Mexicano. de's (BMV:FEMSAUBD) earnings growth rate lags the 16% CAGR delivered to shareholders

Simply Wall St · 06/19 17:09

By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, the Fomento Económico Mexicano, S.A.B. de C.V. (BMV:FEMSAUBD) share price is up 44% in the last three years, clearly besting the market return of around 14% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 2.4%, including dividends.

In light of the stock dropping 3.0% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, Fomento Económico Mexicano. de achieved compound earnings per share growth of 1.9% per year. This EPS growth is lower than the 13% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
BMV:FEMSA UBD Earnings Per Share Growth June 19th 2025

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Fomento Económico Mexicano. de's TSR for the last 3 years was 57%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Fomento Económico Mexicano. de provided a TSR of 2.4% over the last twelve months. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 9% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Fomento Económico Mexicano. de .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Mexican exchanges.