Is Now The Time To Put Orica (ASX:ORI) On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Orica (ASX:ORI). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Orica with the means to add long-term value to shareholders.

See our latest analysis for Orica

How Fast Is Orica Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. To the delight of shareholders, Orica has achieved impressive annual EPS growth of 54%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Orica remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 12% to AU$7.9b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Orica's forecast profits?

Are Orica Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

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. Purchases like this clue us in to the to the faith management has in the business' future.

Recent insider purchases of Orica stock is not the only way management has kept the interests of the general public shareholders in mind. To be specific, the CEO is paid modestly when compared to company peers of the same size. For companies with market capitalisations between AU$5.9b and AU$18b, like Orica, the median CEO pay is around AU$3.9m.

The Orica CEO received AU$3.1m in compensation for the year ending September 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Is Orica Worth Keeping An Eye On?

Orica's earnings have taken off in quite an impressive fashion. Not to mention the company's insiders have been adding to their portfolios and the CEO's remuneration policy looks to have had shareholders in mind seeing as it's quite modest for the company size. The strong EPS growth suggests Orica may be at an inflection point. If these have piqued your interest, then this stock surely warrants a spot on your watchlist. It is worth noting though that we have found 2 warning signs for Orica that you need to take into consideration.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.