KOF

We rate COCA COLA FEMSA SAB DE CV (KOF) as a Buy with a composite score of 71.6/100 at a current price of $110.56. The stock scores above average across the majority of our six quantitative factors and ranks #67 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in stability (95th percentile) and value (93th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (35th percentile) and momentum (66th percentile) tempers our overall conviction. We assign a Narrow Moat rating (64/100), 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.

COCA COLA FEMSA SAB DE CV holds a mid-tier position (#34 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 71.6/100 places it at rank #67 in our full 7,333-stock universe. At $4.1B in market capitalization, COCA COLA FEMSA SAB DE CV is a mid-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 14% and favorable momentum (66th 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 46% (+3.5pp vs sector) narrow to operating margins of 13% (+11.5pp vs sector) and net margins of 8.8%, yielding a gross-to-net conversion rate of 19%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $110.56, COCA COLA FEMSA SAB DE CV appears undervalued relative to its fundamentals. Our value factor score of 93/100 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 a P/E of 75.5x (a 240% premium to the sector median of 22.3x), EV/EBITDA of 0.3x (discounted to peers), P/B of 0.2x, P/S of 0.0x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Low uncertainty rating to COCA COLA FEMSA SAB DE CV. The company exhibits strong financial stability with a beta of 0.27, and a stability factor in the 95th 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 0.27 — while defensive, this may indicate limited upside participation in bull markets; elevated valuation multiple (P/E 75.5x) that leaves limited margin for error. 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 95th percentile and quality factor at the 82th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 46% provide a buffer against cost pressures; above-average stability (95th percentile) suggests predictable business dynamics. 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 COCA COLA FEMSA SAB DE CV's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 68.5%, and the balance sheet is managed within acceptable parameters (D/E: 53%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; COCA COLA FEMSA SAB DE CV falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, 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, COCA COLA FEMSA SAB DE CV receives a Buy rating with a composite score of 71.6/100 (rank #67 of 7,333). Our quantitative framework assigns a Narrow Moat (64/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 74/100.

Our analysis supports a constructive view on COCA COLA FEMSA SAB DE CV. The combination of identifiable competitive advantages, 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.