Here's Why I Think Baazeem Trading (TADAWUL:4051) Is An Interesting Stock

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 completely lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Baazeem Trading (TADAWUL:4051). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Baazeem Trading

Baazeem Trading's Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. Like a wedge-tailed eagle on the wind, Baazeem Trading's EPS soared from ر.س2.04 to ر.س2.59, in just one year. That's a impressive gain of 27%.

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. While we note Baazeem Trading's EBIT margins were flat over the last year, revenue grew by a solid 9.4% to ر.س285m. 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.

Baazeem Trading isn't a huge company, given its market capitalization of ر.س1.0b. That makes it extra important to check on its balance sheet strength.

Are Baazeem Trading Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own Baazeem Trading shares worth a considerable sum. With a whopping ر.س361m worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 34% of the stock on issue, thus making insiders influential, and aligned, owners of the business.

Does Baazeem Trading Deserve A Spot On Your Watchlist?

For growth investors like me, Baazeem Trading's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. Still, you should learn about the 3 warning signs we've spotted with Baazeem Trading (including 1 which is a bit concerning) .

You can invest in 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. 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.
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