Abu Dhabi Ship Building PJSC (ADX:ADSB) Ticks All The Boxes When It Comes To Earnings Growth

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Abu Dhabi Ship Building PJSC (ADX:ADSB), 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 Abu Dhabi Ship Building PJSC with the means to add long-term value to shareholders.

View our latest analysis for Abu Dhabi Ship Building PJSC

How Quickly Is Abu Dhabi Ship Building PJSC Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, Abu Dhabi Ship Building PJSC has achieved impressive annual EPS growth of 42%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Abu Dhabi Ship Building PJSC remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 64% to د.إ1.4b. That's progress.

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.

Since Abu Dhabi Ship Building PJSC is no giant, with a market capitalisation of د.إ895m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Abu Dhabi Ship Building PJSC Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Abu Dhabi Ship Building PJSC insiders have a significant amount of capital invested in the stock. Indeed, they hold د.إ79m worth of its stock. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 8.8% of the shares on issue for the business, an appreciable amount considering the market cap.

Is Abu Dhabi Ship Building PJSC Worth Keeping An Eye On?

Abu Dhabi Ship Building PJSC's earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, Abu Dhabi Ship Building PJSC is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Of course, just because Abu Dhabi Ship Building PJSC is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

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 Emirian 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.