For starters, it might seem like a good idea (and an exciting prospect) to buy a company that tells investors a good story, even if it completely lacks a track record of revenue and earnings. But as Warren Buffett said, “If you’ve been playing poker for half an hour and you still don’t know who the sucker is, you’re the sucker.” When buying such stocks, investors are too often suckers.
In the era of blue-sky tech-stock investments, my choice may seem old-fashioned; I always prefer profitable companies like Dr. Sulaiman Al Habib Medical Services Group (TADAWUL: 4013). Now, I’m not saying the stock is necessarily undervalued today; but I can’t help but appreciate the profitability of the business itself. While a well-funded business may suffer losses for years, unless its owners have an endless appetite to subsidize the customer, it will eventually have to turn a profit, or else breathe its last breath.
Check out our latest analysis for Dr. Sulaiman Al Habib Medical Services Group
How fast is Dr Sulaiman Al Habib Medical Services Group growing?
If a company can keep increasing its earnings per share (EPS) long enough, its stock price will eventually follow. This makes EPS growth an attractive quality for any business. It is certainly pleasing to see that Dr. Sulaiman Al Habib’s medical services group has managed to increase EPS by 21% per year over three years. This has no doubt fueled the optimism that sees stocks trading on a high earnings multiple.
I like to see revenue growth as an indication that growth is sustainable, and I look for a high margin on earnings before interest and taxes (EBIT) to point to a competitive moat (although some low-margin companies also have moats). While we note that Dr. Sulaiman Al Habib Medical Services Group’s EBIT margins have remained stable over the past year, revenues have increased by 21% to £7.5 billion. This is a real plus point.
The chart below shows how the company’s top and bottom line has grown over time. To see the actual numbers, click on the chart.
You don’t drive with your eyes on the rearview mirror, so you might be more interested in that free report showing analyst forecasts for Dr. Sulaiman Al Habib Medical Services Group coming profits.
Are Dr. Sulaiman Al Habib Medical Services Group insiders aligned with all shareholders?
Personally, I like to see high insider ownership in a company, as it suggests that it will be run in the interests of shareholders. So, as you can imagine, the fact that Dr. Sulaiman Al Habib Medical Services Group insiders hold a significant number of shares certainly appeals to me. In fact, they own 42% of the shares, making insiders a very influential group of shareholders. I take comfort in this type of alignment, as it suggests that the company will be run for the benefit of shareholders. And their stake is hugely valuable at the current share price, totaling £31bn. That’s what I call serious skin in the game!
Is Dr. Sulaiman Al Habib Medical Services Group Worth Watching?
Since I believe that share price follows earnings per share, you can easily imagine how I feel about the strong EPS growth of Dr. Sulaiman Al Habib Medical Services Group. I think EPS growth is something to brag about, and it doesn’t surprise me that insiders are holding a sizable amount of stock. Rapid growth and confident insiders should be enough to warrant further research. So the answer is that I think it’s a good stock to follow. If you think Dr. Sulaiman Al Habib Medical Services Group might suit your style of investing, you can go directly to his annual report, or you can first check out our discounted cash flow (DCF) assessment for the company.
You can invest in the company of your choice. But if you’d rather focus on stocks that have been insider-buying, here’s a list of companies that have been insider-buying in the past three months.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.