If EPS Growth Is Important To You, Al Rajhi Banking and Investment (TADAWUL:1120) Presents An Opportunity

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Al Rajhi Banking and Investment (TADAWUL:1120). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Al Rajhi Banking and Investment

How Fast Is Al Rajhi Banking and Investment Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Al Rajhi Banking and Investment has grown EPS by 20% 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 beaming.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It's noted that Al Rajhi Banking and Investment's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Al Rajhi Banking and Investment maintained stable EBIT margins over the last year, all while growing revenue 9.2% to ر.س27b. That's encouraging news for the company!

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Al Rajhi Banking and Investment's future EPS 100% free.

Are Al Rajhi Banking and Investment Insiders Aligned With All Shareholders?

Owing to the size of Al Rajhi Banking and Investment, 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. Indeed, they have a considerable amount of wealth invested in it, currently valued at ر.س6.7b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Al Rajhi Banking and Investment, with market caps over ر.س30b, is about ر.س2.8m.

The Al Rajhi Banking and Investment CEO received total compensation of only ر.س180k in the year to December 2021. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Should You Add Al Rajhi Banking and Investment To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Al Rajhi Banking and Investment's strong EPS growth. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. The overarching message here is that Al Rajhi Banking and Investment has underlying strengths that make it worth a look at. Now, you could try to make up your mind on Al Rajhi Banking and Investment by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Although Al Rajhi Banking and Investment 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.