Should You Be Adding Al Rajhi Banking and Investment (TADAWUL:1120) To Your Watchlist Today?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like 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.

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Al Rajhi Banking and Investment's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Al Rajhi Banking and Investment grew its EPS by 11% per year. That's a good rate of growth, if it can be sustained.

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. 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. While we note Al Rajhi Banking and Investment achieved similar EBIT margins to last year, revenue grew by a solid 24% to ر.س35b. That's a real positive.

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.

Check out our latest analysis for Al Rajhi Banking and Investment

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Al Rajhi Banking and Investment's forecast profits?

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 do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth ر.س8.9b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations over ر.س30b, like Al Rajhi Banking and Investment, the median CEO pay is around ر.س745k.

The Al Rajhi Banking and Investment CEO received ر.س435k in compensation for the year ending December 2024. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Al Rajhi Banking and Investment Deserve A Spot On Your Watchlist?

As previously touched on, Al Rajhi Banking and Investment is a growing business, which is encouraging. The growth of EPS may be the eye-catching headline for Al Rajhi Banking and Investment, but there's more to bring joy for shareholders. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. We should say that we've discovered 1 warning sign for Al Rajhi Banking and Investment that you should be aware of before investing here.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in SA with promising growth potential and insider confidence.

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.