A Little Near-Term Softness Hasn't Changed The FEMSA Story

Although FEMSA (NYSE:FMX) haven’t done all that well since my last write-up, I think the modest pullback could be another opportunity for long-term investors to acquire shares in one of the best-run Mexican companies, not to mention one with consider room left to grow. FEMSA shares have been hurt by a combination of currency moves, natural disaster-related traffic disruptions, and some concerns about capital allocation, but I believe these are all short-term issues that don’t impinge upon the underlying value.

I continue to believe that FEMSA will leverage long-term high single-digit revenue growth into double-digit FCF growth, supporting a fair value in the $105 to $115 range. FEMSA has several NPV-positive potential capital projects to choose from, including accelerating the growth of OXXO, acquiring more drug stores, or expanding further outside Mexico, and I believe pullbacks below $100 are good buying opportunities.

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A Little Near-Term Softness Hasn't Changed The FEMSA Story