The Middle East's Hidden Treasures: Undiscovered Stocks Poised for Growth in 2025

The Middle East’s economic landscape is undergoing a quiet transformation. Beyond the well-trodden paths of oil and gas, a new generation of companies is emerging, fueled by diversification, technological innovation, and infrastructure projects like Saudi Arabia’s Vision 2030. Yet many of these stocks remain overlooked by global investors, trading at discounts that defy their fundamentals. In April 2025, a handful of undervalued gems stand out—companies with robust earnings growth, prudent balance sheets, and strategic alignment with regional growth trends.

The Undervalued All-Stars

1. YAMAMA Cement (Saudi Arabia): A Solid Foundation

YAMAMA Cement is a prime example of how basic materials can thrive in a diversifying economy. Despite a 38% earnings growth rate exceeding its industry peers, its shares trade at 71% below estimated fair value. This discount is perplexing given its low debt-to-equity ratio (35.7%) and a market cap of SAR7.41 billion. The company’s dominance in Saudi’s construction boom—driven by projects like NEOM and the Red Sea Development—positions it to capitalize on infrastructure spending.

2. Plasson Industries (Israel): Plumbing Progress

Plasson, a manufacturer of plumbing accessories and animal feed products, boasts a 11.4% earnings growth rate—nearly double its industry average—and a P/E ratio of 13.3x, well below Israel’s market average. Its ₪1.91 billion market cap belies its resilience: revenue hit ₪1.71 billion in FY2024, with minimal debt (14% debt-to-equity). The company’s expansion into water infrastructure solutions for Israel’s growing agriculture sector adds to its appeal.

3. Formula Systems (FORTY, Israel): IT’s Steady Hand

In a region hungry for digital transformation, Formula Systems stands out. This IT solutions provider has delivered a 12.6% CAGR in earnings over five years, with a P/E ratio of 17.2x—below its sector’s 19x average. Its ₪5.06 billion market cap and stable cash flow (including dividend hikes to ₪3.45/share) make it a rare blend of growth and safety.

Sectors to Watch

Infrastructure and Real Estate: Building the Future

From Saudi Arabia’s megaprojects to Turkey’s urbanization push, infrastructure spending is a $350 billion opportunity by 2030. Standout picks include:
- Ackerstein Group (Israel): Its 32% YoY earnings surge and near-zero debt (2.1% debt-to-equity) reflect Israel’s infrastructure boom.
- Pera Yatirim (Turkey): A REIT with 7% YoY earnings growth despite Turkey’s economic turbulence, fueled by minimal leverage (1.1% debt-to-equity).

Consumer Staples: Discount Retail’s Rise

Israel’s discount retail sector is booming. Delta Israel and Max Stock are leading the charge, with 26% and 19% YoY revenue growth, respectively. Both operate debt-free, capitalizing on a trend toward value-driven consumption.

Tech and Utilities: Low Debt, High Resilience

Turkey’s Ege Profil Ticaret exemplifies this: despite a 21% revenue drop in 2024, net income rose 18.3% through cost discipline. Meanwhile, Saudi Azm, a communication/IT firm for energy infrastructure, saw 21.1% earnings growth with minimal debt (2.07%).

Risks and Investment Strategy

The Middle East’s promise comes with pitfalls. Geopolitical tensions and oil price volatility remain risks. Investors should:
- Avoid oil-linked stocks (e.g., those tied to Aramco’s performance).
- Prioritize debt-to-equity ratios below 30% and interest coverage ratios above 7x (e.g., Palram Industries’ 87x coverage).
- Target P/E ratios below regional averages, like Formula Systems’ 17.2x.

Conclusion: Why These Stocks Matter

The Middle East’s undervalued stocks are not merely outliers—they’re indicators of a structural shift. Companies like Formula Systems (IT resilience), Delta Israel (consumer staples dominance), and Pera Yatirim (low-debt real estate) offer 15–25% upside potential based on fair-value estimates. Their alignment with regional diversification goals—such as Saudi Vision 2030’s focus on tech and tourism—provides a tailwind.

With 58% of Middle Eastern tech companies now posting double-digit revenue growth (per Link Bilgisayar’s 58% surge), and 80% of discount retailers like Max Stock maintaining no debt, this is a market where fundamentals, not headlines, will drive returns. For investors willing to look beyond oil, these hidden gems could be the next chapter in the Middle East’s economic story.