FMX

We rate MEXICAN ECONOMIC DEVELOPMENT INC (FMX) as a Buy with a composite score of 73.6/100 at a current price of $111.79. The stock scores above average across the majority of our six quantitative factors and ranks #25 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in value (99th percentile) and stability (94th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Wide Moat rating (72/100), Low uncertainty, and Standard capital allocation.

Key items to watch: quarterly earnings execution and sector-level competitive dynamics. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

MEXICAN ECONOMIC DEVELOPMENT INC holds a top-quartile position (#12 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 73.6/100 places it at rank #25 in our full 7,333-stock universe. With a $29.7B market capitalization, MEXICAN ECONOMIC DEVELOPMENT INC operates at meaningful scale within the Manufacturing sector, providing competitive advantages in distribution, procurement, and customer reach.

The outlook is moderately positive, with revenue expanding at 11% and favorable momentum (63th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 41% (-1.4pp vs sector) narrow to operating margins of 9% (+7.7pp vs sector) and net margins of 10.3%, yielding a gross-to-net conversion rate of 25%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $111.79, MEXICAN ECONOMIC DEVELOPMENT INC appears undervalued relative to its fundamentals. Our value factor score of 99/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at EV/EBITDA of 0.3x (discounted to peers), P/B of 0.1x, P/S of 0.0x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a Low uncertainty rating to MEXICAN ECONOMIC DEVELOPMENT INC. The company exhibits strong financial stability with a beta of 0.25, and a stability factor in the 94th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.25 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 94th percentile and quality factor at the 83th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 41% provide a buffer against cost pressures; above-average stability (94th percentile) suggests predictable business dynamics; a 5.51% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate MEXICAN ECONOMIC DEVELOPMENT INC's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 108.0%, and the balance sheet is managed within acceptable parameters (D/E: 82%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; MEXICAN ECONOMIC DEVELOPMENT INC falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 5.51% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, MEXICAN ECONOMIC DEVELOPMENT INC receives a Buy rating with a composite score of 73.6/100 (rank #25 of 7,333). Our quantitative framework assigns a Wide Moat (72/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 77/100.

Our analysis supports a constructive view on MEXICAN ECONOMIC DEVELOPMENT INC. The combination of a wide competitive moat, low uncertainty, and standard capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.