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 currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Riyad Bank (TADAWUL:1010). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
View our latest analysis for Riyad Bank
How Fast Is Riyad Bank Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Riyad Bank managed to grow EPS by 9.4% per year, over three years. 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. Our analysis has highlighted that Riyad Bank's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. Riyad Bank maintained stable EBIT margins over the last year, all while growing revenue 17% to ر.س13b. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Riyad Bank's forecast profits?
Are Riyad Bank Insiders Aligned With All Shareholders?
Owing to the size of Riyad Bank, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. As a matter of fact, their holding is valued at ر.س119m. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 0.1%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Does Riyad Bank Deserve A Spot On Your Watchlist?
One important encouraging feature of Riyad Bank is that it is growing profits. To add an extra spark to the fire, significant insider ownership in the company is another highlight. These two factors are a huge highlight for the company which should be a strong contender your watchlists. You still need to take note of risks, for example - Riyad Bank has 2 warning signs (and 1 which can't be ignored) we think you should know about.
The beauty of investing is that you can invest in almost 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. 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.
About SASE:1010
Riyad Bank
Provides banking and investment services in the Kingdom of Saudi Arabia.
Flawless balance sheet established dividend payer.
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