Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term Loma Negra Compañía Industrial Argentina Sociedad Anónima (NYSE:LOMA) shareholders, since the share price is down 46% in the last three years, falling well short of the market return of around 44%. The falls have accelerated recently, with the share price down 16% in the last three months. But this could be related to the weak market, which is down 16% in the same period.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Although the share price is down over three years, Loma Negra Compañía Industrial Argentina Sociedad Anónima actually managed to grow EPS by 17% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
Given the healthiness of the dividend payments, we doubt that they've concerned the market. It's good to see that Loma Negra Compañía Industrial Argentina Sociedad Anónima has increased its revenue over the last three years. But it's not clear to us why the share price is down. It might be worth diving deeper into the fundamentals, lest an opportunity goes begging.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at Loma Negra Compañía Industrial Argentina Sociedad Anónima's financial health with this free report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Loma Negra Compañía Industrial Argentina Sociedad Anónima the TSR over the last 3 years was -40%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We can sympathize with Loma Negra Compañía Industrial Argentina Sociedad Anónima about their 6.5% loss for the year ( including dividends), but the silver lining is that the broader market return was worse, at around -9.8%. Furthermore, the stock lost shareholders 12% per year over three years, so the one-year return was better in a relative sense. It could well be that the business has begun to stabilize, though the recent returns are hardly impressive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Loma Negra Compañía Industrial Argentina Sociedad Anónima is showing 3 warning signs in our investment analysis , you should know about...
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.