Loma Negra Compañía Industrial Argentina Sociedad Anónima (NYSE:LOMA) And The Basic Materials Industry Prospect For 2018

Loma Negra Compañía Industrial Argentina Sociedad Anónima (NYSE:LOMA), a US$1.00b small-cap, operates in the basic materials industry which supplies materials for construction. This means it is highly sensitive to changes in the economic cycle, a key driver of building activities. Furthermore, the basic materials sector can be affected by shifts in the housing market, as many produced raw materials are components of construction projects. For example, if new housing development slows, the demand for lumber products may also decrease. Basic material analysts are forecasting for the entire industry, a highly optimistic growth of 38.0% in the upcoming year , and a massive growth of 67.3% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Is the construction materials industry an attractive sector-play right now? Below, I will examine the sector growth prospects, as well as evaluate whether Loma Negra Compañía Industrial Argentina Sociedad Anónima is lagging or leading its competitors in the industry.

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

What’s the catalyst for Loma Negra Compañía Industrial Argentina Sociedad Anónima's sector growth?

Altogether the basic materials sector seems to be predominantly mature in terms of its industry life cycle. Companies appear to be vastly competitive and consolidation seems to be a common theme. However, the industry is still facing many emerging trends including the reduction of waste, raw material inflation, and innovation in global supply chain management. In the past year, the industry delivered growth in the twenties, beating the US market growth of 15.3%. Loma Negra Compañía Industrial Argentina Sociedad Anónima leads the pack with its impressive earnings growth of 73.9% over the past year. However, analysts are expecting its future earnings growth to be more in-line with the industry average, hovering at 38.7% over the next couple of years.

Is Loma Negra Compañía Industrial Argentina Sociedad Anónima and the sector relatively cheap?

Construction materials companies are typically trading at a PE of 17.05x, in-line with the US stock market PE of 19.8x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 10.4% on equities compared to the market’s 10.7%. On the stock-level, Loma Negra Compañía Industrial Argentina Sociedad Anónima is trading at a PE ratio of 17.9x, which is relatively in-line with the average construction material stock. In terms of returns, Loma Negra Compañía Industrial Argentina Sociedad Anónima generated 30.5% in the past year, which is 20.1% over the construction material sector.

Next Steps:

Loma Negra Compañía Industrial Argentina Sociedad Anónima’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If Loma Negra Compañía Industrial Argentina Sociedad Anónima has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at Loma Negra Compañía Industrial Argentina Sociedad Anónima's fundamentals in order to build a holistic investment thesis.

1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Historical Track Record: What has LOMA's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Loma Negra Compañía Industrial Argentina Sociedad Anónima? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.