The transformation that FEMSA (NYSE:FMX) has undergone over the last decade or so is pretty remarkable, as the company has built itself into a major force in Mexican retailing as well as a significant player in Coca-Cola's (NYSE:KO) global bottling operations. Management isn't spending much time resting on its laurels, as it takes the cash flow and access to capital generated by its growth to date to reinvest in expanding the business into new end markets like pharmacies and gas stations and new markets like Chile.
FEMSA isn't close to exhausting its potential avenues for growth, but questions about margins and returns on capital are relevant as the company looks to allocate more and more capital to grow the business. I'm still looking for high single-digit to low double-digit long-term growth, and I expect FEMSA to extend its operations into the U.S. and additional Latin American countries in the coming years. The shares aren't dramatically undervalued today and there is some risk of a second half slowdown in Mexico, but it remains a solid option for emerging market growth.
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FEMSA Building Its Empire A Quarter At A Time