In investing, it is not enough to know who earns more or who pays out more; assessing companies begins first by defining what “best” means

While following Saudi economic content published on the X platform, I came across a post by Abdullah Kurdi that included a clip from the account of financial and economic analyst Rashid Al-Fawzan on Snapchat. The clip centered on a question frequently asked by people interested in the financial market: What is the best bank? And what is the best company in a particular sector?

While giving due credit to the originator of the idea and the person who shared the clip, Al-Fawzan’s argument served as the starting point for this article. He drew attention to a problem that may appear simple on the surface but lies at the heart of investment thinking: asking about the “best” company or bank remains an incomplete question unless we first define: best at what?

It is a question worth pausing over—not because it leads to the name of a particular stock, but because it reveals the difference between seeking a quick answer and thinking like an investor and analyst.

Rashid Al-Fawzan is well known in Saudi Arabia’s economic scene as a financial and economic analyst, writer, and presenter of economic programs. This was also the description used by Al Eqtisadiah newspaper when it previously reported his appointment as editorial adviser at CNBC Arabia.

One Word… Many Criteria

When someone asks, “What is the best bank in the Saudi market?” the statement appears specific, but in reality it conceals dozens of questions.

Do they mean the largest bank by assets?

Or the most profitable?

Or the fastest-growing?

Or the one most consistent in paying cash dividends?

Or the bank with the highest credit quality?

Or the one least exposed to nonperforming loans?

Or the one most capable of weathering crises?

A bank may lead on one of these indicators while ranking lower on another. Thus, using the word “best” without specifying the criterion is like asking for the “best car” without saying whether the buyer is looking for speed, safety, fuel economy, or the ability to remain useful for many years.

The financial market works in much the same way: there is no single number that tells the whole story.

That is why Saudi Exchange presents investors with a range of financial ratios rather than relying on a single indicator. These include return on equity, return on assets, the price-to-earnings ratio, the price-to-book ratio, and liquidity ratios. It also explains that these ratios can be used to compare a company’s performance with that of its peers within the same sector.

This is an important point: a good comparison is not between isolated figures, but between similar companies, under comparable conditions, and across more than one criterion.

Why Is a Bank Assessed Differently from an Industrial Company?

A bank is not a petrochemical factory, and a retailer is not a telecommunications company. Therefore, criteria cannot be transferred automatically from one sector to another.

In the banking sector, for example, profits provide only part of the picture.

A bank generates profits primarily by managing money, credit, and risk. For this reason, asset quality becomes one of the most important elements in assessing it. Put simply, this means the quality of the loans and investments on its balance sheet and the likelihood of recovering the money it has lent.

A bank may achieve significant growth in financing over just a few years. This appears positive at first, but it is only truly positive if that growth is accompanied by good loan quality.

If rapid expansion in lending later leads to an increase in defaults, that same growth may become a source of risk.

That is why the International Monetary Fund uses a broad range of indicators when measuring the resilience of the banking sector, including capital adequacy, asset quality, profitability, liquidity, and sensitivity to market risks, and does not reduce a bank’s soundness to the size of its profits alone.

The importance of these indicators is clear in the Saudi case. In its 2026 Article IV consultation report, the International Monetary Fund cited indicators such as capital adequacy, the nonperforming-loan ratio, and asset quality when assessing the Saudi banking sector. According to the report’s data, nonperforming loans accounted for 1% of total sector loans in 2025, while the capital adequacy ratio stood at 20.5%.

These figures do not tell us which bank is “the best,” but they do clarify something more important: the professional approach to assessing a bank is multidimensional to begin with.

The Largest Company Is Not Necessarily the Best

The same issue arises when we turn to industrial, petrochemical, or services companies.

A company may be the largest by revenue, but not have the highest profit margin.

It may be the most profitable, but also carry more debt.

A medium-sized company may be better able to generate cash, more consistent in paying dividends, and less dependent on borrowing.

Therefore, size in itself is not synonymous with quality.

Revenue tells us the scale of activity, but profitability tells us what the company retains after its costs.

Profits tell us what the company achieved on an accounting basis, while cash flows help us determine how much cash its operations actually generated.

Debt reveals another aspect of the picture: how dependent is the company on other people’s money to finance its operations?

An investor may therefore be comparing two companies that generate similar profits, but one may need more capital and more debt to achieve those profits, while the other achieves the same result with fewer resources.

The accounting result may be similar; the economic quality is not necessarily so.

The One-Year Trap

But the aspect of Al-Fawzan’s idea that deserves the most attention is the time dimension.

A company that pays high cash dividends in a single year does not automatically become “the best dividend company.”

The year may have been exceptional.

Perhaps the prices of its products rose unusually sharply. Perhaps it sold an asset and recorded a nonrecurring gain. Or perhaps it benefited from conditions that will not recur in subsequent years.

This is where a central concept in economic and financial analysis comes in: sustainability.

Sustainability means a company’s ability to continue performing well, not merely to do so once.

Therefore, a financial snapshot taken at the end of a single year is not enough to judge a company; it is better to look at a “film” spanning several years.

Are sales increasing over time?

Are profits growing along with them?

Are margins stable?

Does the company generate cash from its operations?

Is its debt under control?

Has it maintained its dividends during periods of both boom and decline?

How did it perform when interest rates, raw-material prices, or demand conditions changed?

In this sense, past years are not merely a financial archive; they are a test of the business model’s ability to endure.

Even Dividends Do Not Provide a Ready-Made Answer

Some investors prefer companies that pay regular cash dividends. This is a legitimate investment objective, but it does not mean that the company paying the highest dividends is best for all investors.

A company that pays most of its profits to shareholders may suit someone seeking regular cash income.

But another company may pay lower dividends because it reinvests its profits in expansions that generate high returns in the future. It may be the more suitable choice for someone seeking long-term growth.

The question, then, is not:

“Who pays more?”

Rather:

Why does the company pay dividends? Can it continue doing so? And what could it have done with the money if it had not distributed it?

Stock grants should also be treated cautiously when assessing returns; an increase in the number of shares owned by a shareholder does not in itself mean that new economic wealth of equal value has been created. Ultimately, value is tied to the businesses, assets, profits, and cash flows underlying those shares.

Then Comes the Surprise: The Best Company May Not Be the Best Stock

Even if we succeed in identifying a company with excellent operating performance, the analysis is not over.

There is a fundamental difference between two questions:

Is this a good company?

And:

Is this company’s stock a good investment at its current price?

The company may be excellent: its profits are growing, its debt is low, its management is strong, and its cash flows are robust.

But if its share price is too high compared with the profits it can generate in the future, the investor may have already paid upfront for a large portion of that expected success.

This is where the concept of valuation comes in.

In the simplest terms, valuation is an attempt to answer the question: Is the price the market is offering today reasonable compared with the value and future profits the company can generate?

That is why the tools Saudi Exchange provides investors include indicators such as the price-to-earnings ratio and the price-to-book ratio, alongside operating-performance ratios.

This means that analyzing a company’s quality and analyzing its share price are two connected stages, but they are not the same thing.

Best… for Whom?

One final piece of the puzzle remains: the investor themselves.

An investor seeking regular cash income has different criteria from one seeking to double their capital over ten years.

An investor able to tolerate significant fluctuations in share prices differs from one whose priority is preserving capital.

Someone investing for several months does not view a company through the same lens as an investor planning to hold it for a decade.

Therefore, the question “What is the best stock?” is incomplete without another question:

Best stock for whom?

The objective, time horizon, and ability to tolerate risk all change the answer.

Here, investing shifts from searching for “the winner” to a process of alignment: between the company, its price, its risks, and the investor’s needs.

From the Popular Question to the Investment Question

Perhaps the greatest value in asking “What is the best bank?” is that it reveals how a simple question can lead to a different way of thinking.

Instead of saying:

What is the best Saudi bank?

we can ask:

Which banks have maintained the best mix of profitability, credit quality, capital adequacy, liquidity, and growth over several years?

Instead of:

What is the best petrochemical company?

we can ask:

Which companies have been able to maintain profitability, cash flows, and financial strength through different stages of the petrochemical price cycle?

Instead of:

Which company pays the highest dividends?

the question becomes:

Which companies have a sustainable cash-dividend policy supported by enduring profits and cash flows?

Then we add a question that is no less important:

Does the current share price make this quality an attractive investment?

In this way, the entire level of discussion changes.

The investor is no longer looking for a name recommended by a personality on a social-media platform, but is building a standard that enables them to reach the answer independently.

This, perhaps, is the most important function of economic knowledge.

The market does not suffer from a shortage of numbers or opinions. What investors need most is to know which number to look at, why, what it tells them, and what it cannot tell them.

Therefore, when the question arises again:

“What is the best bank?”

The most professional answer may be:

First define what you mean by “best.”

Because good investing does not begin by choosing the company.

It begins by formulating the right question.