Yahoo Finance Does Iluka Resources (ASX:ILU) Deserve A Spot On Your Watchlist?
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Iluka Resources (ASX:ILU). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
View our latest analysis for Iluka Resources
Iluka Resources' Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Iluka Resources grew its EPS by 16% per year. That's a pretty good rate, if the company can sustain it.
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. The good news is that Iluka Resources is growing revenues, and EBIT margins improved by 14.4 percentage points to 40%, over the last year. Both of which are great metrics to check off for potential growth.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Iluka Resources?
Are Iluka Resources 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Not only did Iluka Resources insiders refrain from selling stock during the year, but they also spent AU$191k buying it. That's nice to see, because it suggests insiders are optimistic. We also note that it was the Independent Non-Executive Chairman, Robert Cole, who made the biggest single acquisition, paying AU$131k for shares at about AU$8.71 each.
It's commendable to see that insiders have been buying shares in Iluka Resources, but there is more evidence of shareholder friendly management. To be specific, the CEO is paid modestly when compared to company peers of the same size. The median total compensation for CEOs of companies similar in size to Iluka Resources, with market caps between AU$3.0b and AU$9.6b, is around AU$3.6m.
Iluka Resources offered total compensation worth AU$2.9m to its CEO in the year to December 2021. That is actually below the median for CEO's of similarly sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.
Is Iluka Resources Worth Keeping An Eye On?
One positive for Iluka Resources is that it is growing EPS. That's nice to see. And there's more to Iluka Resources, with the insider buying and modest CEO pay being a great look for those with an eye on the company. The sum of all that, points to a quality business, and a genuine prospect for further research. Even so, be aware that Iluka Resources is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...
The good news is that Iluka Resources is not the only growth stock with insider buying. Here's a list of them... 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.
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