Is Now The Time To Put Saudi Arabian Oil (TADAWUL:2222) On Your Watchlist?

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.

In contrast to all that, many investors prefer to focus on companies like Saudi Arabian Oil (TADAWUL:2222), which has not only revenues, but also profits. 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.

See our latest analysis for Saudi Arabian Oil

Saudi Arabian Oil's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Impressively, Saudi Arabian Oil has grown EPS by 23% 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.

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. It's noted that Saudi Arabian Oil's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. On the revenue front, Saudi Arabian Oil has done well over the past year, growing revenue by 29% to ر.س2.2t but EBIT margin figures were less stellar, seeing a decline over the last 12 months. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

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

Are Saudi Arabian Oil Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ر.س7.8t company like Saudi Arabian Oil. But we do take comfort from the fact that they are investors in the company. To be specific, they have ر.س147m worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 0.002% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add Saudi Arabian Oil To Your Watchlist?

For growth investors, Saudi Arabian Oil's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Saudi Arabian Oil'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. You still need to take note of risks, for example - Saudi Arabian Oil has 2 warning signs (and 1 which doesn't sit too well with us) 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.