Why We're Not Concerned About Loma Negra Compañía Industrial Argentina Sociedad Anónima's (NYSE:LOMA) Share Price

With a median price-to-sales (or "P/S") ratio of close to 2.3x in the Basic Materials industry in the United States, you could be forgiven for feeling indifferent about Loma Negra Compañía Industrial Argentina Sociedad Anónima's (NYSE:LOMA) P/S ratio of 2x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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

What Does Loma Negra Compañía Industrial Argentina Sociedad Anónima's P/S Mean For Shareholders?

Recent times haven't been great for Loma Negra Compañía Industrial Argentina Sociedad Anónima as its revenue has been falling quicker than most other companies. One possibility is that the P/S is moderate because investors think the company's revenue trend will eventually fall in line with most others in the industry. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. Or at the very least, you'd be hoping it doesn't keep underperforming if your plan is to pick up some stock while it's not in favour.

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.

Is There Some Revenue Growth Forecasted For Loma Negra Compañía Industrial Argentina Sociedad Anónima?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Loma Negra Compañía Industrial Argentina Sociedad Anónima's to be considered reasonable.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 24%. Even so, admirably revenue has lifted 56% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 5.3% per year during the coming three years according to the two analysts following the company. With the industry predicted to deliver 6.9% growth each year, the company is positioned for a comparable revenue result.

In light of this, it's understandable that Loma Negra Compañía Industrial Argentina Sociedad Anónima's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Final Word

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

A Loma Negra Compañía Industrial Argentina Sociedad Anónima's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Basic Materials industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

The company's balance sheet is another key area for risk analysis. 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.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.