Why Loma Negra’s amended share pledge matters now
Loma Negra Compañía Industrial Argentina Sociedad Anónima (LOMA) recently announced an amended and restated share pledge linked to controlling shareholder InterCement’s court approved reorganization plan, clarifying its own exclusion from the judicial process and confirming its ongoing normal operations.
See our latest analysis for Loma Negra Compañía Industrial Argentina Sociedad Anónima.
At a share price of $11.07, Loma Negra has a 7 day share price return of 5.83% and a 30 day share price return of 12.39%. However, the year to date share price return is a 14.05% decline, while the 1 year total shareholder return of 16.28% and 3 year and 5 year total shareholder returns, which are both well above 100%, point to longer term investors still sitting on substantial gains as the market weighs InterCement’s reorganization alongside the company’s own operating track record.
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With Loma Negra trading at $11.07 and sitting at a roughly 36% discount to the US$15 analyst price target, plus recent revenue and net income growth, are you looking at a mispriced cement player or a market already counting on future gains?
Preferred P/E of 76.3x: Is it justified?
On a P/E of 76.3x, compared with peers and the wider basic materials space, Loma Negra’s current share price of $11.07 reflects a rich earnings multiple.
The P/E ratio compares the share price to earnings per share and is often used for established, profitable businesses. For a cement and materials company, a very high P/E can signal that the market is pricing in a strong earnings recovery, or is paying up for perceived quality despite weaker recent profitability.
In this case, Loma Negra’s 76.3x P/E stands well above both the global basic materials industry average of 14.9x and the peer average of 21.2x. It also sits far above the estimated fair P/E of 25.5x, a level the market could move towards if expectations cool or earnings do not keep pace with the current price.
Explore the SWS fair ratio for Loma Negra Compañía Industrial Argentina Sociedad Anónima
Result: Price-to-Earnings of 76.3x (OVERVALUED)
However, there are still clear risks, including InterCement’s reorganization overhang and the possibility that a 76.3x P/E leaves little room for earnings disappointment.
Another way to look at value
That rich 76.3x P/E is not the only warning sign. Our DCF model estimates the value of Loma Negra’s future cash flows at $7.77 per share, compared with today’s $11.07 price. This points to an overvalued setup rather than a hidden bargain. So what is the market really paying up for?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Loma Negra Compañía Industrial Argentina Sociedad Anónima for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 58 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
With sentiment this mixed, it makes sense to move quickly, review the key data points yourself, and weigh up both sides by checking the 1 key reward and 1 important warning sign.
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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.
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