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The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Orica (ASX:ORI). 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 Fast Is Orica Growing Its Earnings Per Share?
Over the last three years, Orica has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, Orica's EPS shot from AU$0.61 to AU$1.05, over the last year. It's not often a company can achieve year-on-year growth of 72%.
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. While Orica may have maintained EBIT margins over the last year, revenue has fallen. While this may raise concerns, investors should investigate the reasoning behind this.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Orica's future profits.
Are Orica Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Orica top brass are certainly in sync, not having sold any shares, over the last year. But more importantly, Independent Non-Executive Director Vanessa Guthrie spent AU$151k acquiring shares, doing so at an average price of AU$16.57. Purchases like this clue us in to the to the faith management has in the business' future.