We Ran A Stock Scan For Earnings Growth And Riyad Bank (TADAWUL:1010) Passed With Ease

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Riyad Bank with the means to add long-term value to shareholders.

View our latest analysis for Riyad Bank

How Quickly Is Riyad Bank Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Riyad Bank has grown EPS by 14% per year. That's a pretty good rate, if the company can sustain it.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Not all of Riyad Bank's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note Riyad Bank achieved similar EBIT margins to last year, revenue grew by a solid 16% to ر.س11b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Fortunately, we've got access to analyst forecasts of Riyad Bank's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Riyad Bank Insiders Aligned With All Shareholders?

Since Riyad Bank has a market capitalisation of ر.س100b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Indeed, they hold ر.س115m worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.1% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add Riyad Bank To Your Watchlist?

One positive for Riyad Bank is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. These two factors are a huge highlight for the company which should be a strong contender your watchlists. You should always think about risks though. Case in point, we've spotted 2 warning signs for Riyad Bank you should be aware of, and 1 of them is potentially serious.

Although Riyad Bank certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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.