With EPS Growth And More, Al Ain Ahlia Insurance P.S.C (ADX:ALAIN) Is Interesting

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Al Ain Ahlia Insurance P.S.C (ADX:ALAIN). 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 Al Ain Ahlia Insurance P.S.C

How Fast Is Al Ain Ahlia Insurance P.S.C Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That makes EPS growth an attractive quality for any company. We can see that in the last three years Al Ain Ahlia Insurance P.S.C grew its EPS by 15% per year. That's a pretty good rate, if the company can sustain it.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Al Ain Ahlia Insurance P.S.C's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. Al Ain Ahlia Insurance P.S.C's EBIT margins have actually improved by 11.5 percentage points in the last year, to reach 19%, but, on the flip side, revenue was down 4.5%. That falls short of ideal.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since Al Ain Ahlia Insurance P.S.C is no giant, with a market capitalization of د.إ528m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Al Ain Ahlia Insurance P.S.C 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. As a result, I'm encouraged by the fact that insiders own Al Ain Ahlia Insurance P.S.C shares worth a considerable sum. Indeed, they hold د.إ134m worth of its stock. That's a lot of money, and no small incentive to work hard. That amounts to 25% of the company, demonstrating a degree of high-level alignment with shareholders.

Is Al Ain Ahlia Insurance P.S.C Worth Keeping An Eye On?

One important encouraging feature of Al Ain Ahlia Insurance P.S.C is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. We should say that we've discovered 1 warning sign for Al Ain Ahlia Insurance P.S.C that you should be aware of before investing here.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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. 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.
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