To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Loma Negra Compañía Industrial Argentina Sociedad Anónima (NYSE:LOMA) has the makings of a multi-bagger going forward, but let's have a look at why that may be.
Understanding Return On Capital Employed (ROCE)
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Loma Negra Compañía Industrial Argentina Sociedad Anónima:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.092 = AR$109b ÷ (AR$1.6t - AR$357b) (Based on the trailing twelve months to March 2025).
So, Loma Negra Compañía Industrial Argentina Sociedad Anónima has an ROCE of 9.2%. In absolute terms, that's a low return and it also under-performs the Basic Materials industry average of 14%.
View our latest analysis for Loma Negra Compañía Industrial Argentina Sociedad Anónima
Above you can see how the current ROCE for Loma Negra Compañía Industrial Argentina Sociedad Anónima compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Loma Negra Compañía Industrial Argentina Sociedad Anónima .
What Can We Tell From Loma Negra Compañía Industrial Argentina Sociedad Anónima's ROCE Trend?
In terms of Loma Negra Compañía Industrial Argentina Sociedad Anónima's historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 19% over the last five years. Given the business is employing more capital while revenue has slipped, this is a bit concerning. If this were to continue, you might be looking at a company that is trying to reinvest for growth but is actually losing market share since sales haven't increased.
The Bottom Line On Loma Negra Compañía Industrial Argentina Sociedad Anónima's ROCE
In summary, we're somewhat concerned by Loma Negra Compañía Industrial Argentina Sociedad Anónima's diminishing returns on increasing amounts of capital. Since the stock has skyrocketed 280% over the last five years, it looks like investors have high expectations of the stock. In any case, the current underlying trends don't bode well for long term performance so unless they reverse, we'd start looking elsewhere.
Loma Negra Compañía Industrial Argentina Sociedad Anónima could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for LOMA on our platform quite valuable.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
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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.