Industrias CH, S. A. B. de C. V.'s (BMV:ICHB) Stock Has Shown Weakness Lately But Financial Prospects Look Decent: Is The Market Wrong?

Industrias CH S. A. B. de C. V (BMV:ICHB) has had a rough week with its share price down 3.3%. However, the company's fundamentals look pretty decent, and long-term financials are usually aligned with future market price movements. Particularly, we will be paying attention to Industrias CH S. A. B. de C. V's ROE today.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

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How Is ROE Calculated?

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 Industrias CH S. A. B. de C. V is:

3.1% = Mex$2.2b ÷ Mex$71b (Based on the trailing twelve months to September 2025).

The 'return' refers to a company's earnings over the last year. One way to conceptualize this is that for each MX$1 of shareholders' capital it has, the company made MX$0.03 in profit.

View our latest analysis for Industrias CH S. A. B. de C. V

Why Is ROE Important For 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.

Industrias CH S. A. B. de C. V's Earnings Growth And 3.1% ROE

It is quite clear that Industrias CH S. A. B. de C. V's ROE is rather low. Not just that, even compared to the industry average of 15%, the company's ROE is entirely unremarkable. Thus, the low net income growth of 5.0% seen by Industrias CH S. A. B. de C. V over the past five years could probably be the result of it having a lower ROE.

Next, on comparing with the industry net income growth, we found that Industrias CH S. A. B. de C. V's growth is quite high when compared to the industry average growth of 0.8% in the same period, which is great to see.

Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. This then helps them determine if the stock is placed for a bright or bleak future. If you're wondering about Industrias CH S. A. B. de C. V's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Industrias CH S. A. B. de C. V Using Its Retained Earnings Effectively?

Industrias CH S. A. B. de C. V doesn't pay any regular dividends, which means that it is retaining all of its earnings. However, this doesn't explain the low earnings growth the company has seen. So there could be some other explanation in that regard. For instance, the company's business may be deteriorating.

Conclusion

Overall, we feel that Industrias CH S. A. B. de C. V certainly does have some positive factors to consider. With a high rate of reinvestment, albeit at a low ROE, the company has managed to see a considerable growth in its earnings. While we won't completely dismiss the company, what we would do, is try to ascertain how risky the business is to make a more informed decision around the company. You can see the 1 risk we have identified for Industrias CH S. A. B. de C. V by visiting our risks dashboard for free on our platform here.

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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.