Undervalued Middle Eastern Small-Cap Stocks with Strong Earnings Momentum in August 2025

In August 2025, the Middle East's small-cap landscape is quietly brewing a wave of value opportunities. While global markets fixate on macroeconomic volatility, investors with a contrarian lens are uncovering stocks trading at rock-bottom valuations, supported by improving fundamentals and sector-specific tailwinds. These companies, often overlooked by institutional investors, are now showing signs of earnings momentum that could redefine their trajectories.

The Case for Small-Cap Value in the Middle East

Small-cap stocks in the Middle East have historically been undervalued due to their limited liquidity and perceived risk. However, the current environment—marked by low interest rates, regional economic reforms, and sector-specific innovation—has created fertile ground for value-driven growth. Key metrics such as price-to-earnings (P/E), price-to-book (P/B), and debt-to-equity ratios are flashing green for several companies, signaling mispriced assets with strong earnings resilience.

1. National General Insurance (DFM:NGI): A Defensive Play with Income Potential

UAE-based National General Insurance (DFM:NGI) is a textbook example of a small-cap stock trading at a discount to its intrinsic value. With a P/E ratio of 8.20x—well below the insurance industry average of 12.5x—and a debt-free balance sheet, NGI offers a rare combination of defensive qualities and income generation.

• Earnings Momentum: Q1 2025 net income surged 70% YoY to AED 35.58 million, driven by disciplined underwriting and cost optimization.
• Valuation Metrics: P/S of 1.76x and P/B of 1.60x suggest the stock is undervalued relative to revenue and book value.
• Dividend Yield: A robust 6.92% yield makes it a compelling option for income-focused investors.

NGI's net cash position of AED 33.32 million further insulates it from macroeconomic shocks, positioning it as a long-term hold in a cyclical sector.

2. Etihad Atheeb Telecommunication (SAR:EAH): Tech-Driven Growth in Saudi Arabia

Saudi Arabia's Etihad Atheeb Telecommunication (SAR:EAH) is capitalizing on the kingdom's Vision 2030 push for digital transformation. With an EV/EBITDA of 9.95x and a net cash position of SAR 493.3 million, the company is undervalued despite its high-growth trajectory.

• Earnings Growth: FY 2025 net income reached SAR 219.6 million, with EBITDA of SAR 266.4 million.
• Strategic Positioning: Investments in AI, blockchain, and geospatial technologies align with Saudi Arabia's tech boom.
• Yield Components: A 4.65% dividend yield and 6.66% free cash flow yield enhance its appeal.

EAH's balance sheet strength and alignment with structural reforms make it a high-conviction buy for investors seeking exposure to the Middle East's tech sector.

3. Gipta Ofis (IST:GIPTA): A High-Growth Bet with Short-Term Volatility

Turkey's Gipta Ofis (IST:GIPTA) is a volatile but compelling play. Despite a Q1 2025 net loss of TRY 41.99 million, the company's long-term fundamentals remain intact.

• Earnings Momentum: Past-year earnings growth of 375.7% far outpaces the industry average of 8.7%.
• Valuation Metrics: P/E of 8.20x and a net cash position of TRY 1.53 billion suggest undervaluation.
• Operational Efficiency: A 24.23% gross margin and 10.45% ROI highlight strong pricing power.

Investors should monitor Q2 2025 earnings (August 11, 2025) for signs of recovery. While short-term risks exist, the company's liquidity and growth history justify a long-term position.

4. Nofoth Food Products (SASE:9556): A Nimble Player in a Stable Sector

Saudi Arabia's Nofoth Food Products (SASE:9556) is a small-cap gem in the food sector, where demand is inelastic and margins are improving.

• Earnings Growth: 13% YoY net income in Q1 2025, outpacing the industry average of 9%.
• Valuation Metrics: Trading at 2.6% below estimated fair value with no debt.
• Governance Upgrades: Recent audit committee reforms and a new auditor signal improved transparency.

The company's debt-free profile and sector resilience make it an attractive long-term hold.

5. Girisim Elektrik (IBSE:GESAN): Energy Sector Resilience

Turkey's Girisim Elektrik (IBSE:GESAN) is a standout in the energy sector, where earnings growth has outpaced the industry.

• Earnings Momentum: Q1 2025 net income surged to TRY 412 million from TRY 47 million in the prior year.
• Valuation Metrics: P/E of 13.5x (vs. market average of 20.8x) and a debt-to-equity ratio of 12.2%.
• Revenue Streams: Diversified across Venture (TRY9.87 billion), Euro Power (TRY7.23 billion), and Peak PV (TRY1.76 billion).

GESAN's reduced leverage and strong earnings growth position it as a resilient long-term play.

Investment Thesis: Leveraging Low Valuations and Sector Resilience

The selected stocks share common traits: low valuations, improving fundamentals, and sector-specific tailwinds. For instance:
- Insurance and Food Sectors: Defensive industries with stable demand and improving margins.
- Tech and Telecom: Sectors aligned with Vision 2030 and AI-driven innovation.
- Energy and Utilities: Benefiting from global energy transitions and regional infrastructure projects.

Risks and Due Diligence

While these stocks offer compelling value, investors must remain cautious:
- Short-Term Volatility: Companies like Gipta Ofis may experience earnings fluctuations.
- Geopolitical Risks: Regional tensions could impact sectors like energy and telecom.
- Governance Concerns: Smaller firms may lack the transparency of larger peers.

Conclusion: High-Conviction Long-Term Buys

The Middle East's small-cap market in August 2025 is a treasure trove for value investors. Stocks like National General Insurance, Etihad Atheeb, and Nofoth Food Products combine attractive valuations with strong earnings momentum and sector resilience. While risks exist, the asymmetric risk-reward profile of these companies—particularly in a low-interest-rate environment—makes them compelling long-term buys.

For investors willing to conduct due diligence and adopt a patient approach, these undervalued small-caps could deliver outsized returns as regional economies continue to evolve.