Why Loma Negra Stock Just Dropped 15%

What happened


Six days after being upgraded to "overweight" at Morgan Stanley, and five days after winning a buy rating from Citigroup, shares of Argentinean cement maker Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE: LOMA) got their comeuppance this morning when analysts at Swiss megabank UBS weighed in -- with a sell rating.

Reversing course and cutting its rating on Loma Negra stock from "buy" to "sell," UBS also cut its price target on the stock nearly in half, saying that within a year, it expects Loma Negra shares to be selling for $14.50. Curiously, investors are responding to the news by reducing the price they are willing to pay for the stock today to even less than that.

By 2:30 p.m. EDT, Loma Negra stock was already down 15.3%, selling for just $14.31 a stub.

So what

Does that make sense? It's hard to say. As of this writing, neither of my primary sources for ratings news -- neither TheFly.com nor StreetInsider.com -- has any details at all on why UBS suddenly decided to downgrade Loma Negra stock. All anyone seems to know is that the downgrade happened, full stop.

And yet, the last actual news we got out of Loma Negra itself was pretty darn good. In its first-quarter 2018 earnings report last week, the company announced that it grew its sales 42% and its earnings per share 41% year over year, while cutting its debt load by 43%.

Now what

What's more, Loma Negra told investors that although it expects to grow "at slower rates" over the balance of this year, "following the significant recovery experienced in the prior year ... healthy dynamics in our markets with increasing demand for cement and concrete" are still anticipated.

At its new and improved market capitalization of just $1.7 billion, with $88 million in trailing earnings and $79 million in free cash flow, Loma Negra's stock now sells for 21.5 times free cash flow and 19.3 times GAAP (generally accepted accounting principles) earnings. With minimal debt on its books, I think these are fine prices to pay for a shares of a company that analysts -- UBS excepted, apparently -- still think will grow earnings at 60% annually over the next five years.

10 stocks we like better than Loma Negra Compania Industrial Argentina Sociedad Anonima ADSWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Loma Negra Compania Industrial Argentina Sociedad Anonima ADS wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of May 8, 2018

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.