Stock Analysis

Here's Why I Think Dubai Investments PJSC (DFM:DIC) Might Deserve Your Attention Today

DFM:DIC
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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Dubai Investments PJSC (DFM:DIC). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Dubai Investments PJSC

How Fast Is Dubai Investments PJSC Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years Dubai Investments PJSC grew its EPS by 12% per year. That growth rate is fairly good, assuming the company can keep it up.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. I note that Dubai Investments PJSC's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Dubai Investments PJSC's EBIT margins were flat over the last year, revenue grew by a solid 18% to د.إ3.5b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
DFM:DIC Earnings and Revenue History May 16th 2022

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Dubai Investments PJSC's balance sheet strength, before getting too excited.

Are Dubai Investments PJSC Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Dubai Investments PJSC insiders have a significant amount of capital invested in the stock. Notably, they have an enormous stake in the company, worth د.إ1.0b. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Should You Add Dubai Investments PJSC To Your Watchlist?

As I already mentioned, Dubai Investments PJSC is a growing business, which is what I like to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Dubai Investments PJSC.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.

Valuation is complex, but we're helping make it simple.

Find out whether Dubai Investments PJSC is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.