Betterware de Mexico (BWMX): A Compelling Undervalued Play on Resilient Direct Selling and Expansion

The Value Opportunity in Direct Selling's Resilient Challenger

In a market where traditional retail models struggle with inflationary pressures and shifting consumer behavior, Betterware de Mexico (BWMX) has carved out a compelling value proposition through its direct selling model. As the company enters the second half of 2025, it presents a rare combination of undervaluation, operational recovery, and strategic expansion that merits serious consideration from value-oriented investors.

Undervaluation Amid Operational Recovery

BWMX's valuation metrics paint a picture of significant discount to intrinsic value. The stock currently trades at a P/E of 6.67 and EV/EBITDA of 6.1, metrics that place it among the cheapest in the consumer goods sector. This represents a marked shift from its 2024 P/E of 12.5 and is particularly striking when compared to peers like Reynolds Consumer Products (REYN) at 13.27 P/E or Kellanova (K) at 21.36 P/E. These valuation disparities suggest the market is underestimating BWMX's operational recovery.

While Q2 2025 saw a 1.2% year-over-year revenue decline, the company demonstrated its agility with a 4.0% sequential rebound. This was driven by strategic pricing adjustments, product innovation in home solutions, and a restructured incentive program that yielded the first associate base growth since 2021. The EBITDA margin of 19.9% remains robust despite gross margin compression, and the company is on track to improve this further as top-line growth accelerates.

Strategic Expansion in High-Growth Markets

BWMX's geographic expansion strategy is proving to be a powerful catalyst. The launch of Betterware Ecuador in Q2 2025 exceeded expectations with 2,500 active associates, demonstrating the company's ability to replicate its successful model in new markets. This expansion into Latin America is particularly significant given the region's growing middle class and underpenetrated direct selling market.

In the U.S., Jafra US has shown encouraging signs of stabilization with a 15.6% quarter-over-quarter revenue rebound. While still facing an 8.9% year-over-year decline, this sequential improvement is being driven by internal initiatives rather than external factors - a testament to the company's operational discipline. The CEO has emphasized that these improvements stem from merchandising strategies and product accessibility initiatives, not just macroeconomic conditions.

Resilient Business Model with Structural Advantages

The direct selling model is inherently more resilient than traditional retail in today's economic climate. BWMX's business benefits from:

1. Decentralized Distribution: 657,317 associates and 42,062 distributors form a highly adaptive sales network
2. High EBITDA Conversion: 19.9% margin with 87% free cash flow conversion
3. Price Inelasticity: The average monthly order value increased by 6.2% in Q2 2025
4. Inventory Efficiency: $98M reduction in excess stock in H1 2025

The company's focus on associate growth is particularly noteworthy. The 3.3% associate base growth in Q2 2025 marks the first net growth since Q1 2021, a critical inflection point for a business model that depends on active sales force expansion. This growth is being supported by a personal tagging program to better track associate journeys and optimize incentives.

Investment Case: Balancing Risks and Rewards

While BWMX presents an attractive value proposition, investors must weigh several factors:

• Margin Pressures: Gross margin declined 127 bps in Q2 2025, though EBITDA margins remain strong
• Debt Load: Net debt-to-EBITDA of 1.97x is manageable but requires monitoring
• Market Risks: U.S. operations still face challenges despite sequential improvements

However, these risks are counterbalanced by:

1. Valuation Discount: 6.67 P/E vs. 13.27 for REYN and 21.36 for K
2. Growth Catalysts: 2,500+ new associates in Ecuador and potential U.S. market stabilization
3. Margin Expansion: Management targets 23-24% EBITDA margins through cost efficiencies
4. Capital Efficiency: Free cash flow generation at 87% of EBITDA

The Road Ahead: A Compelling Setup for Value Creation

BWMX is well-positioned for a valuation re-rating as its operational recovery gains traction. The company's Q3 2025 initiatives - including sales mix optimization, enhanced incentive programs, and real-time inventory tracking - are designed to accelerate growth while maintaining margin discipline.

For value investors, the current valuation represents an opportunity to participate in a business with a proven ability to adapt and thrive in challenging environments. At a P/E of 6.67 and EV/EBITDA of 6.1, BWMX offers a margin of safety while providing exposure to a resilient business model with expansion potential in high-growth markets.

Conclusion: A High-Conviction Value Play

Betterware de Mexico presents an unusual combination of undervaluation, operational momentum, and strategic expansion. While the company faces near-term challenges, its strong EBITDA margins, resilient direct selling model, and geographic expansion into Latin America create a compelling long-term investment case. At current valuation levels, the risk/reward profile appears favorable for investors seeking exposure to a value-driven consumer goods play with clear catalysts for near-term improvement and long-term growth.