If EPS Growth Is Important To You, Saudi Reinsurance (TADAWUL:8200) Presents An Opportunity

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. 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 Saudi Reinsurance (TADAWUL:8200). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Saudi Reinsurance with the means to add long-term value to shareholders.

View our latest analysis for Saudi Reinsurance

Saudi Reinsurance's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Saudi Reinsurance has managed to grow EPS by 27% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. Saudi Reinsurance maintained stable EBIT margins over the last year, all while growing revenue 23% to ر.س869m. That's encouraging news for the company!

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.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Saudi Reinsurance's balance sheet strength, before getting too excited.

Are Saudi Reinsurance Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Saudi Reinsurance insiders have a significant amount of capital invested in the stock. Indeed, they hold ر.س118m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 3.6% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Saudi Reinsurance Deserve A Spot On Your Watchlist?

For growth investors, Saudi Reinsurance's raw rate of earnings growth is a beacon in the night. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. 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. We don't want to rain on the parade too much, but we did also find 1 warning sign for Saudi Reinsurance that you need to be mindful of.

Although Saudi Reinsurance certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Saudi companies that not only boast of strong growth but have strong insider backing.

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.