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This headline maker is a superior growth stock to Sirius Minerals plc

Diversified chemicals manufacturer Croda International (LSE: CRDA) has led the FTSE 100 in midweek trade, the stock last dealing 5% higher from Tuesday’s close and at record peaks of £38.70 per share.

Indeed, investor appetite has ignited once again as revenues growth at Croda appears to be stepping up a gear.

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The East Yorkshire business announced that “the improving sales trend seen in the fourth quarter of 2016 has continued in Q1,” with revenues at constant currencies rising 4.9% during January-March. This marks a vast departure from the 1.6% full-year sales decline punched in 2016 and underlines Croda’s improving revenues outlook.

Commenting on the results, Croda chief executive noted that “we are encouraged by the group’s performance in the first quarter,” adding that “whilst we expect the exceptional sales growth seen in Performance Technologies to moderate, we remain on track to deliver continued profitable progress through 2017.”

Core performs

Crucially, organic sales at Croda’s core (comprising its Personal Care, Life Sciences and Performance Technologies divisions and accounting for nine-tenths of total revenues) grew 5.3% in the period, with all three arms seeing sales improve in the last quarter.

Sales at Performance Technologies and Personal Care cantered 11.7% and 4.6% higher respectively during January-March, the former benefiting from strong Lubricant and Polymer Additive sales and the latter from robust demand for its Active products.

Although sales at constant currencies dropped 1.9% at Life Sciences, this fall reflected the drag from a from a long-running North American API contract. Excluding this item, sales at the division actually rose 2.2% during January-March.

Territorial titan

As well as enthusing over Croda’s broad-based strength, share pickers have also been encouraged by the company’s improving popularity across the globe.

In Asia organic sales leapt an impressive 11%, while in Europe turnover improved 8%. And while the aforementioned API contract dragged North American turnover 1% lower, Croda is beginning to see market conditions here — as well as in Latin America — begin to slowly stabilise.

Today’s release underpins the City’s confidence in Croda’s growth outlook, and are likely to prompt revisions to anticipated earnings rises of 26% and 8% for 2017 and 2018 respectively.

So while the chemicals giant deals on a slightly-heady forward P/E ratio of 22.7 times, I reckon the possibility of multiple upgrades to profit forecasts still makes Croda a compelling blue-chip pick.

Promising but petrifying

I am afraid I cannot extend my enthusiasm to potash miner Sirius Minerals (LSE: SXX), however, as I believe the road to earnings growth is littered with possible obstacles.

My fears are not exclusive to Sirius, you see, but rather the wider realm of investing in early-stage commodities specialists. It is true the firm’s polyhalite project in North Yorkshire is one of the most exciting on the planet, but Sirius is not predicted to start pulling maiden material out of the ground until well into the next decade.

In between now and then Sirius faces the prospect of ballooning costs, project delays, the possibility of subsequent financing issues and a range of other uncertainties. In particular, the state of the potash market once Sirius’ production starts hitting the market is anyone’s guess, and could see the digger fall disastrously short of its earnings targets.

Whilst still loaded with plenty of potential, I for one believe the risks at Sirius far outweigh the potential rewards.

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Royston Wild has no position in any 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.

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