Should You Be Adding Saudi Reinsurance (TADAWUL:8200) To Your Watchlist Today?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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.

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How Fast Is Saudi Reinsurance Growing Its Earnings Per Share?

In the last three years Saudi Reinsurance's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Saudi Reinsurance's EPS grew from ر.س1.44 to ر.س4.21, over the previous 12 months. Year on year growth of 192% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.

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. Not all of Saudi Reinsurance's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. The good news is that Saudi Reinsurance is growing revenues, and EBIT margins improved by 13.1 percentage points to 30%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

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.

Check out our latest analysis for Saudi Reinsurance

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. Shareholders will be pleased by the fact that insiders own Saudi Reinsurance shares worth a considerable sum. To be specific, they have ر.س149m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 2.5% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add Saudi Reinsurance To Your Watchlist?

Saudi Reinsurance's earnings per share growth have been climbing higher at an appreciable rate. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Saudi Reinsurance for a spot on your watchlist. However, before you get too excited we've discovered 2 warning signs for Saudi Reinsurance (1 shouldn't be ignored!) that you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Saudi companies which have demonstrated growth backed by significant insider holdings.

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.