With restructuring well and truly off the ground at Croda International(LSE: CRDA), I am convinced investors can look forward to enjoying spectacular returns long into the future.
The FTSE 100 business isn't flavour of the month with share selectors right now as first-quarter numbers released this week missed to the downside.
Revenues at constant currencies rose 'just' 2.6% during the first three months of the year, or 4% when considering Croda's core operations only. City consensus had been suggesting a figure closer to the 5% marker for the company's core divisions.
Still, there was enough in this latest release for investors to be optimistic about. The company has exerted a huge amount of energy to reinvigorate its Personal Care unit, splitting it into three separate arms and doubling down on sales and marketing activities to light a fire under sales.
Croda noted that sales at stable exchange rates leapt 7.6% between January and March as a consequence, continuing the strong momentum of recent months -- revenues on a comparable basis improved 8.2% during the final six months of 2017.
Sales growth was broad based across the division and "growth was driven equally by volume and price/mix, with successful recovery of higher raw material costs," the chemicals giant noted. And demand from multinational manufacturers strengthened in the period thanks to rising innovation across the beauty industry, it said.
On the march
And I believe demand here should continue to light up in the years ahead. The amount people spend on personal care products is on the rise, and particularly so in emerging markets where improving disposable income levels are allowing people to spend more and more on pampering themselves.
However, this isn't the only reason to expect Croda to deliver strong and sustained sales growth as rising demand for so-called green chemicals also drives the company's Life Sciences crop division. Meanwhile, the growing food needs of a galloping global population, and the driving demand for farmers to maximise crop yields, shouldn't do demand for the Footsie firm's products any harm either.
Turnover at constant currencies at Life Sciences advanced 4.1% in quarter one, continuing recent strong sales uptick. Comparable revenues rose 4.6% in 2017.
Earnings and dividends rising
In the more immediate term, City analysts are expecting earnings to rise 7% in 2018 and 8% in 2019. And this leads to predictions of extra dividend growth as well -- the 81p per share dividend paid out in 2017 is anticipated to rise to 88.5p in the current period, and again to 96.4p.
This means that Croda also offers up handy-if-unspectacular yields of 1.9% and 2.1% for these years. However, the company's bright balance sheet should keep dividends growing at a blistering rate, while it also raises the prospect of additional profits-boosting M&A action (Croda snapped up a marine biotechnology specialist Nautilus in January).
It may be expensive on paper but I believe Croda's forward P/E ratio of 23.8 times is a fair price given its robust long-term growth prospects.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.