Is Scales (NZSE:SCL) a Profitable Investment Opportunity?

Scales (NZSE:SCL) is a profitable company with growing EPS, revenue, and EBIT margins. Insiders own a significant amount of shares, indicating alignment with shareholders. The company has a track record of revenue and profit, making it an attractive investment opportunity for those seeking stable financial returns.

July 02, 2025 - Stepan Co. (SCL), a leading manufacturer of specialty chemicals, reported its Q2 2025 results, showcasing continued growth in earnings per share (EPS), revenue, and EBIT margins. The company's Q2 revenue increased by 20% to $2.3 billion, while adjusted EPS from continuing operations rose by 15% to $0.75 per share. These results exceeded analyst estimates and reflect the company's strategic transformation, including the expansion of its specialty chemical portfolio.

The sales growth was driven by a notable increase in the Industrial Chemicals segment, which rose by 25% to $1.5 billion. The segment's performance was bolstered by stronger orders from key industries, contributing to a 22% increase in orders to $500 million. Additionally, the company achieved a record backlog of $1.2 billion, with a book-to-bill ratio of 2.3x, indicating strong demand and future revenue visibility.

The company's adjusted EBIT margin improved by 140 basis points to 15.5%, reflecting the positive impact of the recent acquisitions and improved operational efficiency. Despite the increase in adjusted EPS, GAAP EPS from continuing operations decreased by 12% to $0.65 per share due to acquisition costs related to the recent Industrial Chemicals acquisition.

The Industrial Solutions segment showed a marginal sales increase of 3%, with a 1% increase in sales from its core business. However, the segment's EBIT decreased by $0.5 million, largely due to inflationary pressures and mix.

Looking ahead, Stepan Co. has raised its full-year revenue and adjusted EPS guidance, indicating confidence in continued growth and operational performance improvement. The company expects to deliver above-market growth, driven by its enhanced portfolio of businesses and record backlog.

Additionally, the company reported insider activity by Director F. Quinn Stepan Jr. on August 4-5, 2025. The director sold 6,300 shares at $49.962 and 3,700 shares at $50.489, totaling approximately 10,000 shares and approximately $500,000 gross. The director also transferred 3,000 shares to joint tenancy with his spouse at no cost. The director's direct ownership post-trade decreased to 159,423 shares, down roughly 6%, while indirect interests totaled approximately 429,000 shares across family LLCs, trusts, ESOPs, and estates. The director also holds 63,405 deferred share units plus 43,167 units in his father’s deferred plan. No Rule 10b5-1 trading plan box was marked, suggesting discretionary transactions. Given the company’s ~22 million share float, the 10,000-share sale is immaterial to liquidity but may be watched as a sentiment signal.

References:
[1] https://www.stocktitan.net/sec-filings/SCL/form-4-stepan-co-insider-trading-activity-625f494fb0cc.html