Cautious Investors Not Rewarding Loma Negra Compañía Industrial Argentina Sociedad Anónima's (NYSE:LOMA) Performance Completely

There wouldn't be many who think Loma Negra Compañía Industrial Argentina Sociedad Anónima's (NYSE:LOMA) price-to-earnings (or "P/E") ratio of 16.9x is worth a mention when the median P/E in the United States is similar at about 18x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Loma Negra Compañía Industrial Argentina Sociedad Anónima has been doing quite well of late. It might be that many expect the strong earnings performance to deteriorate like the rest, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for Loma Negra Compañía Industrial Argentina Sociedad Anónima

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Is There Some Growth For Loma Negra Compañía Industrial Argentina Sociedad Anónima?

In order to justify its P/E ratio, Loma Negra Compañía Industrial Argentina Sociedad Anónima would need to produce growth that's similar to the market.

If we review the last year of earnings growth, the company posted a terrific increase of 120%. The latest three year period has also seen an excellent 218% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Shifting to the future, estimates from the dual analysts covering the company suggest earnings should grow by 275% over the next year. Meanwhile, the rest of the market is forecast to only expand by 13%, which is noticeably less attractive.

With this information, we find it interesting that Loma Negra Compañía Industrial Argentina Sociedad Anónima is trading at a fairly similar P/E to the market. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Loma Negra Compañía Industrial Argentina Sociedad Anónima currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Loma Negra Compañía Industrial Argentina Sociedad Anónima that you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com