Stock Analysis

Is Now The Time To Put Edarat Communication and Information Technology (TADAWUL:9557) On Your Watchlist?

SASE:9557
Source: Shutterstock

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Edarat Communication and Information Technology (TADAWUL:9557). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Edarat Communication and Information Technology

How Fast Is Edarat Communication and Information Technology Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's easy to see why many investors focus in on EPS growth. Edarat Communication and Information Technology's EPS skyrocketed from ر.س10.00 to ر.س13.79, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 38%.

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. EBIT margins for Edarat Communication and Information Technology remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 36% to ر.س80m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

earnings-and-revenue-history
SASE:9557 Earnings and Revenue History March 4th 2024

Edarat Communication and Information Technology isn't a huge company, given its market capitalisation of ر.س668m. That makes it extra important to check on its balance sheet strength.

Are Edarat Communication and Information Technology Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Edarat Communication and Information Technology followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have ر.س134m worth of shares. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 20% of the shares on issue for the business, an appreciable amount considering the market cap.

Should You Add Edarat Communication and Information Technology To Your Watchlist?

You can't deny that Edarat Communication and Information Technology has grown its earnings per share at a very impressive rate. That's attractive. 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. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Edarat Communication and Information Technology , and understanding these should be part of your investment process.

Although Edarat Communication and Information Technology 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.

Valuation is complex, but we're helping make it simple.

Find out whether Edarat Communication and Information Technology is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.