Should You Be Adding Old Mutual (JSE:OMU) To Your Watchlist Today?

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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Old Mutual (JSE:OMU), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Old Mutual with the means to add long-term value to shareholders.

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How Fast Is Old Mutual 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. We can see that in the last three years Old Mutual grew its EPS by 5.9% per year. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Our analysis has highlighted that Old Mutual's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note Old Mutual achieved similar EBIT margins to last year, revenue grew by a solid 5.4% to R105b. That's a real positive.

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.

See our latest analysis for Old Mutual

Fortunately, we've got access to analyst forecasts of Old Mutual's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Old Mutual Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. The median total compensation for CEOs of companies similar in size to Old Mutual, with market caps between R36b and R115b, is around R28m.

The Old Mutual CEO received R18m in compensation for the year ending December 2024. That is actually below the median for CEO's of similarly 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 Old Mutual Worth Keeping An Eye On?

As previously touched on, Old Mutual is a growing business, which is encouraging. To add to this, the modest CEO compensation should tell investors that the directors have an active interest in delivering the best for shareholders. So all in all Old Mutual is worthy at least considering for your watchlist. We don't want to rain on the parade too much, but we did also find 1 warning sign for Old Mutual that you need to be mindful of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of South African companies which have demonstrated growth backed by significant insider holdings.

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.