Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone 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.
In contrast to all that, I prefer to spend time on companies like Nutrien (TSE:NTR), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
How Quickly Is Nutrien Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. As a tree reaches steadily for the sky, Nutrien's EPS has grown 26% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Nutrien's EBIT margins were flat over the last year, revenue grew by a solid 12% to US$22b. 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.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Nutrien.
Are Nutrien Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. 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.
Not only did Nutrien insiders refrain from selling stock during the year, but they also spent US$178k buying it. That's nice to see, because it suggests insiders are optimistic. It is also worth noting that it was Executive VP and Chief Human Resources & Administrative Officer Michael Webb who made the biggest single purchase, worth CA$118k, paying CA$69.95 per share.
I do like that insiders have been buying shares in Nutrien, but there is more evidence of shareholder friendly management. Specifically, the CEO is paid quite reasonably for a company of this size. I discovered that the median total compensation for the CEOs of companies like Nutrien, with market caps over US$8.0b, is about US$6.0m.
The Nutrien CEO received total compensation of just US$442k in the year to . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. 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.
Does Nutrien Deserve A Spot On Your Watchlist?
You can't deny that Nutrien has grown its earnings per share at a very impressive rate. That's attractive. But wait, it gets better. We have seen insider buying and the executive pay seems on the modest side of things. The message I'd take from this quick rundown is that, yes, this stock is worth investigating further. Before you take the next step you should know about the 4 warning signs for Nutrien (1 makes us a bit uncomfortable!) that we have uncovered.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Nutrien, you'll probably love this free list of growing companies that insiders are buying.
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.
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