Loma Negra Compañía Industrial Argentina Sociedad Anónima's (NYSE:LOMA) Stock Is Going Strong: Is the Market Following Fundamentals?

editorial-team@simplywallst.com (Simply Wall St)

Sun, Apr 20, 2025, 7:27 AM 4 min read

Loma Negra Compañía Industrial Argentina Sociedad Anónima's (NYSE:LOMA) stock is up by a considerable 8.8% over the past week. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. Particularly, we will be paying attention to Loma Negra Compañía Industrial Argentina Sociedad Anónima's ROE today.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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How To Calculate Return On Equity?

The formula for ROE is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Loma Negra Compañía Industrial Argentina Sociedad Anónima is:

19% = AR$154b ÷ AR$793b (Based on the trailing twelve months to December 2024).

The 'return' is the profit over the last twelve months. So, this means that for every $1 of its shareholder's investments, the company generates a profit of $0.19.

Check out our latest analysis for Loma Negra Compañía Industrial Argentina Sociedad Anónima

What Is The Relationship Between ROE And Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.

Loma Negra Compañía Industrial Argentina Sociedad Anónima's Earnings Growth And 19% ROE

To start with, Loma Negra Compañía Industrial Argentina Sociedad Anónima's ROE looks acceptable. Further, the company's ROE is similar to the industry average of 18%. This probably goes some way in explaining Loma Negra Compañía Industrial Argentina Sociedad Anónima's significant 56% net income growth over the past five years amongst other factors. We reckon that there could also be other factors at play here. Such as - high earnings retention or an efficient management in place.

Next, on comparing with the industry net income growth, we found that Loma Negra Compañía Industrial Argentina Sociedad Anónima's growth is quite high when compared to the industry average growth of 19% in the same period, which is great to see.

past-earnings-growth — NYSE:LOMA Past Earnings Growth April 20th 2025

Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock's future looks promising or ominous. If you're wondering about Loma Negra Compañía Industrial Argentina Sociedad Anónima's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Loma Negra Compañía Industrial Argentina Sociedad Anónima Using Its Retained Earnings Effectively?

Loma Negra Compañía Industrial Argentina Sociedad Anónima has a really low three-year median payout ratio of 22%, meaning that it has the remaining 78% left over to reinvest into its business. So it looks like Loma Negra Compañía Industrial Argentina Sociedad Anónima is reinvesting profits heavily to grow its business, which shows in its earnings growth.

Additionally, Loma Negra Compañía Industrial Argentina Sociedad Anónima has paid dividends over a period of five years which means that the company is pretty serious about sharing its profits with shareholders. Our latest analyst data shows that the future payout ratio of the company is expected to drop to 11% over the next three years. Despite the lower expected payout ratio, the company's ROE is not expected to change by much.

Conclusion

On the whole, we feel that Loma Negra Compañía Industrial Argentina Sociedad Anónima's performance has been quite good. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. Unsurprisingly, this has led to an impressive earnings growth.

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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.