Does Dubai Refreshment (P.J.S.C.) (DFM:DRC) Deserve A Spot On Your Watchlist?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like Dubai Refreshment (P.J.S.C.) (DFM:DRC). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for Dubai Refreshment (P.J.S.C.)

How Fast Is Dubai Refreshment (P.J.S.C.) 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Dubai Refreshment (P.J.S.C.) has grown EPS by 34% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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. The good news is that Dubai Refreshment (P.J.S.C.) is growing revenues, and EBIT margins improved by 4.5 percentage points to 15%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

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 Refreshment (P.J.S.C.)'s balance sheet strength, before getting too excited.

Are Dubai Refreshment (P.J.S.C.) Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Dubai Refreshment (P.J.S.C.) insiders have a significant amount of capital invested in the stock. With a whopping د.إ342m worth of shares as a group, insiders have plenty riding on the company's success. At 25% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.

Should You Add Dubai Refreshment (P.J.S.C.) To Your Watchlist?

You can't deny that Dubai Refreshment (P.J.S.C.) has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. However, before you get too excited we've discovered 2 warning signs for Dubai Refreshment (P.J.S.C.) (1 can't be ignored!) that you should be aware of.

Although Dubai Refreshment (P.J.S.C.) certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.