Undervalued Middle Eastern Stocks with Strong Earnings Growth and Resilient Balance Sheets

The Middle East's small-cap equities market has long been a mosaic of volatility and opportunity. In 2025, as geopolitical tensions persist and global energy transitions reshape demand, investors are increasingly scrutinizing companies with robust earnings growth and resilient balance sheets. These firms, often overlooked by broader markets, offer asymmetric risk-reward profiles that could outperform in a low-interest-rate environment. Below, we dissect high-conviction opportunities across sectors, emphasizing how strategic positioning and financial discipline can mitigate regional uncertainties.

The Case for Resilience: Earnings Growth and Debt Discipline

The region's economic transformation—driven by Saudi Arabia's Vision 2030, UAE diversification, and Turkey's industrial reforms—has created fertile ground for companies with strong fundamentals. Firms that combine earnings momentum with prudent debt management are particularly compelling. For instance, Etihad Atheeb Telecommunication (SAR:EAH), a Saudi tech firm, reported a 219.6 million SAR net income in FY 2025, supported by a 0.97% debt-to-equity ratio and 493.3 million SAR in net cash. Its alignment with AI and geospatial tech initiatives positions it to benefit from long-term digital infrastructure spending.

Similarly, National General Insurance (DFM:NGI) in the UAE has leveraged its debt-free balance sheet to deliver a 70% year-over-year net income surge in Q1 2025. With a P/E ratio of 8.20x and a 6.92% dividend yield, it offers both defensive qualities and income potential—a rare combination in a volatile market.

Sector-Specific Tailwinds: Insurance, Energy, and Food

Defensive sectors like insurance and food are gaining traction. Al Wathba National Insurance Company PJSC, for example, reported 10.37% revenue growth and a 3.14% earnings increase, with a 10.97% debt-to-equity ratio. Its five-star health rating underscores its ability to weather macroeconomic fluctuations. Meanwhile, Nofoth Food Products (SASE:9556) in Saudi Arabia, trading 2.6% below its fair value, has seen a 13% year-over-year net income rise, bolstered by no debt and improved governance.

Energy and utilities also present compelling cases. Girisim Elektrik (IBSE:GESAN), a Turkish energy firm, slashed its debt-to-equity ratio to 12.2% while reporting a 412 million TRY net income in Q1 2025. Its diversified revenue streams and reduced leverage make it a resilient long-term play.

High-Growth Outliers: Transportation and Real Estate

High-growth outliers like Gür-Sel Turizm (IBSE:GESAN) and Adra Gayrimenkul (IBSE:ADGYO) demonstrate how niche sectors can thrive. Gür-Sel Turizm, a Turkish transportation company, surged 67.59% in earnings and 51.77% in revenue, driven by post-pandemic travel recovery. Adra Gayrimenkul, a real estate investment trust, operates debt-free and trades 76% below its fair value, with a 509% earnings growth in the past year.

Risks and Mitigation Strategies

Geopolitical risks—such as oil price swings or regional conflicts—remain. However, companies with strong balance sheets and diversified revenue streams can insulate themselves. For example, Cohen Development Gas & Oil (TASE:CDEV) in Israel, a debt-free energy firm, has grown earnings by 34.8% annually, leveraging regional energy projects to offset volatility.

Investment Thesis: Patience and Due Diligence

The key to capitalizing on these opportunities lies in patience and rigorous due diligence. While short-term volatility is inevitable, the asymmetric risk-reward of these stocks—particularly in a low-rate environment—makes them attractive for long-term investors. For instance, Formula Systems (TASE:FORTY), an Israeli IT services firm, trades 43% below its fair value despite a 6.5% net debt-to-equity ratio, offering a margin of safety.

Conclusion

The Middle East's small-cap market in 2025 is a treasure trove for investors who prioritize fundamentals over headlines. By focusing on companies like Etihad Atheeb, National General Insurance, and Gür-Sel Turizm, investors can harness sector-specific tailwinds while mitigating geopolitical risks. As regional economies continue to evolve, these undervalued stocks may deliver outsized returns for those willing to look beyond the noise.