I Ran A Stock Scan For Earnings Growth And Islamic Arab Insurance (Salama) PJSC (DFM:SALAMA) Passed With Ease

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Islamic Arab Insurance (Salama) PJSC (DFM:SALAMA). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 Islamic Arab Insurance (Salama) PJSC

How Quickly Is Islamic Arab Insurance (Salama) PJSC Increasing Earnings Per Share?

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. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Islamic Arab Insurance (Salama) PJSC has managed to grow EPS by 33% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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 Islamic Arab Insurance (Salama) PJSC'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. The good news is that Islamic Arab Insurance (Salama) PJSC is growing revenues, and EBIT margins improved by 10.0 percentage points to 20%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Since Islamic Arab Insurance (Salama) PJSC is no giant, with a market capitalization of د.إ1.0b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Islamic Arab Insurance (Salama) 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. As a result, I'm encouraged by the fact that insiders own Islamic Arab Insurance (Salama) PJSC shares worth a considerable sum. To be specific, they have د.إ140m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 14% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add Islamic Arab Insurance (Salama) PJSC To Your Watchlist?

For growth investors like me, Islamic Arab Insurance (Salama) PJSC's raw rate of earnings growth is a beacon in the night. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. 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 1 warning sign for Islamic Arab Insurance (Salama) PJSC that you should be aware of.

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.

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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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