Investors Still Aren't Entirely Convinced By Loma Negra Compañía Industrial Argentina Sociedad Anónima's (NYSE:LOMA) Earnings Despite 26% Price Jump

Loma Negra Compañía Industrial Argentina Sociedad Anónima (NYSE:LOMA) shares have had a really impressive month, gaining 26% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 88%.

Even after such a large jump in price, it's still not a stretch to say that Loma Negra Compañía Industrial Argentina Sociedad Anónima's price-to-earnings (or "P/E") ratio of 18.1x right now seems quite "middle-of-the-road" compared to the market in the United States, where the median P/E ratio is around 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.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

With earnings growth that's superior to most other companies of late, Loma Negra Compañía Industrial Argentina Sociedad Anónima has been doing relatively well. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

View our latest analysis for Loma Negra Compañía Industrial Argentina Sociedad Anónima

Keen to find out how analysts think Loma Negra Compañía Industrial Argentina Sociedad Anónima's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Loma Negra Compañía Industrial Argentina Sociedad Anónima's Growth Trending?

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.

Retrospectively, the last year delivered an exceptional 108% gain to the company's bottom line. The latest three year period has also seen an excellent 503% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 28% each year as estimated by the four analysts watching the company. That's shaping up to be materially higher than the 10% each year growth forecast for the broader market.

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 Key Takeaway

Its shares have lifted substantially and now Loma Negra Compañía Industrial Argentina Sociedad Anónima's P/E is also back up to the market median. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

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.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Loma Negra Compañía Industrial Argentina Sociedad Anónima with six simple checks on some of these key factors.

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.

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

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.