You may think that with a price-to-sales (or "P/S") ratio of 1.9x Loma Negra Compañía Industrial Argentina Sociedad Anónima (NYSE:LOMA) is a stock worth checking out, seeing as almost half of all the Basic Materials companies in the United States have P/S ratios greater than 2.6x and even P/S higher than 5x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.
NYSE:LOMA Price to Sales Ratio vs Industry May 23rd 2024
What Does Loma Negra Compañía Industrial Argentina Sociedad Anónima's P/S Mean For Shareholders?
Recent times have been advantageous for Loma Negra Compañía Industrial Argentina Sociedad Anónima as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Loma Negra Compañía Industrial Argentina Sociedad Anónima.
Is There Any Revenue Growth Forecasted For Loma Negra Compañía Industrial Argentina Sociedad Anónima?
Loma Negra Compañía Industrial Argentina Sociedad Anónima's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.
Taking a look back first, we see that the company grew revenue by an impressive 159% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Looking ahead now, revenue is anticipated to climb by 128% during the coming year according to the three analysts following the company. That's shaping up to be materially higher than the 9.1% growth forecast for the broader industry.
With this in consideration, we find it intriguing that Loma Negra Compañía Industrial Argentina Sociedad Anónima's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.
The Key Takeaway
Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
A look at Loma Negra Compañía Industrial Argentina Sociedad Anónima's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.
We don't want to rain on the parade too much, but we did also find 1 warning sign for Loma Negra Compañía Industrial Argentina Sociedad Anónima that you need to be mindful of.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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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.