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 as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
In contrast to all that, I prefer to spend time on companies like Oil-Dri Corporation of America (NYSE:ODC), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
Oil-Dri Corporation of America's Earnings Per Share Are Growing.
As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. I, for one, am blown away by the fact that Oil-Dri Corporation of America has grown EPS by 41% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. On the one hand, Oil-Dri Corporation of America's EBIT margins fell over the last year, but on the other hand, revenue grew. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Since Oil-Dri Corporation of America is no giant, with a market capitalization of US$275m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Oil-Dri Corporation of America Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Oil-Dri Corporation of America top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the Independent Director, Allan Selig, paid US$140k to buy shares at an average price of US$34.90.
The good news, alongside the insider buying, for Oil-Dri Corporation of America bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have US$27m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 9.7% of the company, demonstrating a degree of high-level alignment with shareholders.
Does Oil-Dri Corporation of America Deserve A Spot On Your Watchlist?
Oil-Dri Corporation of America's earnings have taken off like any random crypto-currency did, back in 2017. The cherry on top is that insiders own a bunch of shares, and one has been buying more. Because of the potential that it has reached an inflection point, I'd suggest Oil-Dri Corporation of America belongs on the top of your watchlist. We should say that we've discovered 1 warning sign for Oil-Dri Corporation of America that you should be aware of before investing here.
As a growth investor I do like to see insider buying. But Oil-Dri Corporation of America isn't the only one. You can see a a free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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