Loma Negra Compañía Industrial Argentina Sociedad Anónima (NYSE:LOMA) stock performs better than its underlying earnings growth over last three years

One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Loma Negra Compañía Industrial Argentina Sociedad Anónima (NYSE:LOMA) share price is up 95% in the last three years, clearly besting the market return of around 25% (not including dividends).

The past week has proven to be lucrative for Loma Negra Compañía Industrial Argentina Sociedad Anónima investors, so let's see if fundamentals drove the company's three-year performance.

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

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, Loma Negra Compañía Industrial Argentina Sociedad Anónima achieved compound earnings per share growth of 87% per year. The average annual share price increase of 25% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how Loma Negra Compañía Industrial Argentina Sociedad Anónima has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Loma Negra Compañía Industrial Argentina Sociedad Anónima stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Loma Negra Compañía Industrial Argentina Sociedad Anónima, it has a TSR of 173% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Loma Negra Compañía Industrial Argentina Sociedad Anónima has rewarded shareholders with a total shareholder return of 79% in the last twelve months. And that does include the dividend. That's better than the annualised return of 23% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before deciding if you like the current share price, check how Loma Negra Compañía Industrial Argentina Sociedad Anónima scores on these 3 valuation metrics.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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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.