If EPS Growth Is Important To You, Alinma Bank (TADAWUL:1150) Presents An Opportunity

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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 Alinma Bank (TADAWUL:1150). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Alinma Bank

Alinma Bank's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. Impressively, Alinma Bank has grown EPS by 33% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. It's noted that Alinma Bank's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Alinma Bank remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 24% to ر.س8.4b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Alinma Bank.

Are Alinma Bank Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ر.س89b company like Alinma Bank. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. To be specific, they have ر.س80m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 0.09%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Is Alinma Bank Worth Keeping An Eye On?

You can't deny that Alinma Bank has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Alinma Bank's continuing strength. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Alinma Bank that you should be aware of.

Although Alinma Bank certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Saudi companies that not only boast of strong growth but have also seen recent insider buying..

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.