Financial Analysis: Fomento Economico Mexicano SAB (FMX) vs. Pepsico (PEP)

Fomento Economico Mexicano SAB (NYSE: FMX) and Pepsico (NASDAQ:PEP) are both large-cap non-cyclical consumer goods & services companies, but which is the better stock? We will compare the two businesses based on the strength of their dividends, earnings, profitability, institutional ownership, risk, valuation and analyst recommendations.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Fomento Economico Mexicano SAB and Pepsico, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Fomento Economico Mexicano SAB 0 2 4 0 2.67
Pepsico 0 7 7 0 2.50

Fomento Economico Mexicano SAB presently has a consensus target price of $115.75, indicating a potential upside of 23.90%. Pepsico has a consensus target price of $122.33, indicating a potential upside of 3.96%. Given Fomento Economico Mexicano SAB’s stronger consensus rating and higher probable upside, research analysts clearly believe Fomento Economico Mexicano SAB is more favorable than Pepsico.

Profitability

This table compares Fomento Economico Mexicano SAB and Pepsico’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Fomento Economico Mexicano SAB 10.91% 17.30% 9.18%
Pepsico 10.97% 59.68% 9.70%

Insider & Institutional Ownership

21.2% of Fomento Economico Mexicano SAB shares are held by institutional investors. Comparatively, 70.2% of Pepsico shares are held by institutional investors. 0.3% of Pepsico shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Fomento Economico Mexicano SAB and Pepsico’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Fomento Economico Mexicano SAB $21.44 billion 1.56 $1.03 billion $6.69 13.96
Pepsico $62.80 billion 2.66 $6.33 billion $4.84 24.31

Pepsico has higher revenue and earnings than Fomento Economico Mexicano SAB. Fomento Economico Mexicano SAB is trading at a lower price-to-earnings ratio than Pepsico, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Fomento Economico Mexicano SAB has a beta of 0.54, meaning that its stock price is 46% less volatile than the S&P 500. Comparatively, Pepsico has a beta of 0.68, meaning that its stock price is 32% less volatile than the S&P 500.

Dividends

Fomento Economico Mexicano SAB pays an annual dividend of $1.35 per share and has a dividend yield of 1.4%. Pepsico pays an annual dividend of $3.22 per share and has a dividend yield of 2.7%. Fomento Economico Mexicano SAB pays out 20.2% of its earnings in the form of a dividend. Pepsico pays out 66.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Summary

Pepsico beats Fomento Economico Mexicano SAB on 12 of the 16 factors compared between the two stocks.

About Fomento Economico Mexicano SAB

Fomento Economico Mexicano, S.A.B. de C.V. (FEMSA) is a holding company. The Company’s segments are Coca-Cola FEMSA, FEMSA Comercio-Retail Division and FEMSA Comercio-Fuel Division. The Company conducts its operations through holding companies, such as Coca-Cola FEMSA, S.A.B. de C.V. and subsidiaries (Coca-Cola FEMSA), which produces, distributes and sells beverages; FEMSA Comercio, S.A. de C.V. and subsidiaries (FEMSA Comercio), which consists of a Retail Division operating various small-format chain stores, and CB Equity LLP, which holds its equity investment in Heineken N.V., and Heineken Holding N.V. The Company’s Coca-Cola FEMSA produces, markets, sells and distributes Coca-Cola trademark beverages through standard bottler agreements in certain territories in the countries, in which it operates. Coca-Cola FEMSA also sells bottled water products. FEMSA participates in the retail sector primarily through FEMSA Comercio.

About Pepsico

PepsiCo, Inc. is a global food and beverage company. The Company’s portfolio of brands includes Frito-Lay, Gatorade, Pepsi-Cola, Quaker and Tropicana. The Company operates through six segments: Frito-Lay North America (FLNA), Quaker Foods North America (QFNA), North America Beverages (NAB), Latin America, Europe Sub-Saharan Africa (ESSA), and Asia, Middle East and North Africa (AMENA). The FLNA segment includes its branded food and snack businesses in the United States and Canada. The QFNA segment includes its cereal, rice, pasta and other branded food businesses in the United States and Canada. The NAB segment includes its beverage businesses in the United States and Canada. The Latin America segment includes its beverage, food and snack businesses in Latin America. The ESSA segment includes its beverage, food and snack businesses in Europe and Sub-Saharan Africa. The AMENA segment includes its beverage, food and snack businesses in Asia, Middle East and North Africa.

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