Yahoo Finance Do Orica's (ASX:ORI) Earnings Warrant Your Attention?
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
In contrast to all that, many investors prefer to focus on companies like Orica (ASX:ORI), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for Orica
How Quickly Is Orica Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, Orica has achieved impressive annual EPS growth of 51%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Orica maintained stable EBIT margins over the last year, all while growing revenue 12% to AU$7.9b. That's encouraging news for the company!
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of Orica's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Orica Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
With strong conviction, Orica insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the Independent Non-Executive Director, Vanessa Guthrie, paid AU$79k to buy shares at an average price of AU$15.46. It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.
Recent insider purchases of Orica stock is not the only way management has kept the interests of the general public shareholders in mind. Specifically, the CEO is paid quite reasonably for a company of this size. The median total compensation for CEOs of companies similar in size to Orica, with market caps between AU$6.2b and AU$19b, is around AU$4.2m.
Orica offered total compensation worth AU$3.1m to its CEO in the year to September 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.
Is Orica Worth Keeping An Eye On?
Orica's earnings per share growth have been climbing higher at an appreciable rate. The company can also boast of insider buying, and reasonable remuneration for the CEO. The strong EPS growth suggests Orica may be at an inflection point. For those attracted to fast growth, we'd suggest this stock merits monitoring. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Orica that you should be aware of.
The good news is that Orica is not the only growth stock with insider buying. Here's a list of growth-focused companies in AU with insider buying in the last three months!
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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.
