Loma Negra Compañía Industrial Argentina Sociedad Anónima (NYSE:LOMA) Is Reinvesting At Lower Rates Of Return

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Having said that, from a first glance at Loma Negra Compañía Industrial Argentina Sociedad Anónima (NYSE:LOMA) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Loma Negra Compañía Industrial Argentina Sociedad Anónima is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.075 = AR$94b ÷ (AR$1.6t - AR$394b) (Based on the trailing twelve months to June 2025).

Therefore, Loma Negra Compañía Industrial Argentina Sociedad Anónima has an ROCE of 7.5%. In absolute terms, that's a low return and it also under-performs the Basic Materials industry average of 13%.

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

Above you can see how the current ROCE for Loma Negra Compañía Industrial Argentina Sociedad Anónima compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Loma Negra Compañía Industrial Argentina Sociedad Anónima .

What Does the ROCE Trend For Loma Negra Compañía Industrial Argentina Sociedad Anónima Tell Us?

When we looked at the ROCE trend at Loma Negra Compañía Industrial Argentina Sociedad Anónima, we didn't gain much confidence. Around five years ago the returns on capital were 18%, but since then they've fallen to 7.5%. And considering revenue has dropped while employing more capital, we'd be cautious. This could mean that the business is losing its competitive advantage or market share, because while more money is being put into ventures, it's actually producing a lower return - "less bang for their buck" per se.

The Key Takeaway

In summary, we're somewhat concerned by Loma Negra Compañía Industrial Argentina Sociedad Anónima's diminishing returns on increasing amounts of capital. Yet despite these poor fundamentals, the stock has gained a huge 164% over the last five years, so investors appear very optimistic. In any case, the current underlying trends don't bode well for long term performance so unless they reverse, we'd start looking elsewhere.

One more thing to note, we've identified 1 warning sign with Loma Negra Compañía Industrial Argentina Sociedad Anónima and understanding it should be part of your investment process.

While Loma Negra Compañía Industrial Argentina Sociedad Anónima isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.