Loma Negra Compañía Industrial Argentina Sociedad Anónima (NYSE:LOMA) Screens Well But There Might Be A Catch

When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") above 18x, you may consider Loma Negra Compañía Industrial Argentina Sociedad Anónima (NYSE:LOMA) as an attractive investment with its 14.9x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Loma Negra Compañía Industrial Argentina Sociedad Anónima has been struggling lately as its earnings have declined faster than most other companies. The P/E is probably low because investors think this poor earnings performance isn't going to improve at all. You'd much rather the company wasn't bleeding earnings if you still believe in the business. Or at the very least, you'd be hoping the earnings slide doesn't get any worse if your plan is to pick up some stock while it's out of 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.

What Are Growth Metrics Telling Us About The Low P/E?

The only time you'd be truly comfortable seeing a P/E as low as Loma Negra Compañía Industrial Argentina Sociedad Anónima's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered a frustrating 10% decrease to the company's bottom line. Even so, admirably EPS has lifted 297% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the seven analysts covering the company suggest earnings should grow by 32% per annum over the next three years. With the market only predicted to deliver 12% each year, the company is positioned for a stronger earnings result.

In light of this, it's peculiar that Loma Negra Compañía Industrial Argentina Sociedad Anónima's P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Loma Negra Compañía Industrial Argentina Sociedad Anónima currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Loma Negra Compañía Industrial Argentina Sociedad Anónima (at least 1 which is a bit unpleasant), and understanding them should be part of your investment process.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a P/E ratio below 20x).

This article by Simply Wall St is general in nature. 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.

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