information

Article
A Hybrid MCDM Approach Using the BWM and the TOPSIS for a
Financial Performance-Based Evaluation of Saudi Stocks
Abdulrahman T. Alsanousi 1 , Ammar Y. Alqahtani 1, * , Anas A. Makki 2 and Majed A. Baghdadi 1

1 Department of Industrial Engineering, Faculty of Engineering, King Abdulaziz University, P.O. Box 80204,
Jeddah 21589, Saudi Arabia; [email protected] (A.T.A.);
[email protected] (M.A.B.)
2 Department of Industrial Engineering, Faculty of Engineering—Rabigh, King Abdulaziz University,
P.O. Box 80204, Jeddah 21589, Saudi Arabia; [email protected]
* Correspondence: [email protected]

Abstract: This study presents a hybrid multicriteria decision-making approach for evaluating stocks
in the Saudi Stock Market. The objective is to provide investors and stakeholders with a robust evalu-
ation methodology to inform their investment decisions. With a market value of USD 2.89 trillion
dollars in September 2022, the Saudi Stock Market is of significant importance for the country’s
economy. However, navigating the complexities of stock market performance poses investment
challenges. This study employs the best–worst method and the technique for order preference by
similarity to identify an ideal solution to address these challenges. Utilizing data from the Saudi
Stock Market (Tadawul), this study evaluates stock performance based on financial criteria, including
return on equity, return on assets, net profit margin, and asset turnover. The findings reveal valuable
insights, particularly in the banking sector, which exhibited the highest net profit margin ratios among
sectors. The hybrid multicriteria decision-making-based approach enhances investment decisions.
This research provides a foundation for future investigations, facilitating a deeper exploration and
analysis of additional aspects of the Saudi Stock Market’s performance. The developed methodology
and findings have implications for investors and stakeholders, aiding their investment decisions and
maximizing returns.
Citation: Alsanousi, A.T.; Alqahtani,
A.Y.; Makki, A.A.; Baghdadi, M.A. A
Keywords: stocks; financial performance; evaluation; investment; MCDM; BWM; TOPSIS
Hybrid MCDM Approach Using the
BWM and the TOPSIS for a Financial
Performance-Based Evaluation of
Saudi Stocks. Information 2024, 15, 258. 1. Introduction
https://doi.org/10.3390/info15050258 Investors in the stock market are often driven by the objective of achieving high re-
Academic Editor: Maria Carmen turns while minimizing risks. However, this goal becomes challenging due to various
Carnero factors influencing stock market performance, such as the global economy, political events,
and security concerns. To navigate these complexities, investors must consider a range of
Received: 26 March 2024 criteria to guide their decision-making process. When it comes to stock market investing,
Revised: 27 April 2024
the use of multicriteria decision making (MCDM) becomes a significant challenge. Investors
Accepted: 29 April 2024
must evaluate and compare numerous stocks based on predetermined criteria to identify
Published: 2 May 2024
those with the most significant potential for high returns. This evaluation process involves
analyzing both fundamental and stock market indicators. Fundamental indicators assess a
company’s financial performance, including its earnings per share, return on investment,
Copyright: © 2024 by the authors.
and price-to-earnings ratio. These indicators provide insights into the company’s profitabil-
Licensee MDPI, Basel, Switzerland. ity, efficiency, and valuation, which are vital considerations for investors. On the other
This article is an open access article hand, stock market indicators provide information on trading volumes and overall market
distributed under the terms and risk, allowing investors to gauge market sentiment and potential volatility.
conditions of the Creative Commons Given the complexity and diversity of the Saudi Stock Market, which encompasses
Attribution (CC BY) license (https:// more than 21 sectors and over 200 companies, selecting stocks for investment becomes
creativecommons.org/licenses/by/ an intricate task. Each sector has unique dynamics and potential opportunities, adding
4.0/). another layer of complexity to the decision-making process. In such situations, employing

Information 2024, 15, 258. https://doi.org/10.3390/info15050258 https://www.mdpi.com/journal/information

Information 2024, 15, 258 2 of 22

MCDM methods becomes crucial for structuring and analyzing complex problems, enabling
investors to consider multiple criteria simultaneously.
The Saudi Stock Market is of significant importance globally. With over 210 listed
companies distributed across various sectors, including banks and financial services, petro-
chemical industries, energy, and more, the Saudi Stock Market plays a vital role in the
country’s economic landscape. Under the Vision 2030 initiative, the private sector’s role
is also increasing, with the government aiming to raise the private sector’s contribution
to the gross domestic product (GDP) from 40% to 65% by 2030. Given the significance of
the Saudi Stock Market and the challenges associated with selecting optimal stocks for
investment, there is a clear need for a hybrid model based on MCDM to guide investment
decisions and maximize returns.
This study aims to address this need by utilizing MCDM methods to analyze and
rank selected stocks from different sectors in the Saudi Stock Market. The objectives of
this study encompass several key aspects. First, a comprehensive review of the existing
literature on MCDM methods and stock market performance will be conducted. This
review will provide valuable insights and establish a solid foundation for a subsequent
analysis. Second, this study will identify the sectors with the most potential within the
Saudi Stock Market, considering various factors such as market trends, growth prospects,
and investor sentiment. Third, valuable stocks will be selected from each sector based on a
thorough evaluation of their fundamental and stock market indicators. Fourth, MCDM
methods will be employed to rank the selected stocks, considering the predetermined
criteria and their relative importance. Finally, this study aims to rank the stocks that offer
the highest return potential in the Saudi Stock Market.
This study aspires to contribute to the knowledge of MCDM methods and their
application in the Saudi Stock Market. The findings will provide valuable insights and
guidance for investors, enabling them to make more informed decisions and optimize
their investment strategies in the dynamic and rapidly evolving Saudi Stock Market.
This study offers a unique methodology tailored to the specific context of stock market
evaluation, adding to the existing literature. This approach presents a fresh perspective
on evaluating stock performance and assists decision-makers in making well-informed
investment decisions.
The rest of this paper is structured as follows. Section 2 provides a review of the
literature on key topics related to the stock market, including applications of mathematical
programming, MCDM methods, and other analytical approaches used in stock market
research. Section 3 outlines this study’s proposed methodology, including identifying the
top five sectors and stocks for each sector and criteria, determining criteria weights, and
evaluating stock performance as alternatives. Section 4 presents the results of applying
each stage of the methodology. Section 5 discusses the findings and results of the analysis.
Finally, Section 6 summarizes the main conclusions and limitations of this study and
provides recommendations for future work.

2. Literature Review
This literature review section offers a comprehensive survey of prior research rel-
evant to the subjects examined in this paper. It is organized into four subcategories to
ensure thorough coverage of key areas in the literature. Section 2.1 summarizes general
studies on the stock market, highlighting the fundamental criteria deemed important for
investors and presenting an overview of classification frameworks and significant findings
from literature reviews in this field. Section 2.2 focuses on mathematical programming
applications in the stock market, discussing utilizing a linear programming model and
emphasizing the robustness of the resultant model. Section 2.3 explores various MCDM
methods discussed in the literature, providing an overview of different approaches, such as
preference ranking for organization method for enrichment evaluation (PROMETHEE), the
best–worst method (BWM), ranking alternatives by perimeter similarity (RAPS), the tech-
nique for order preference by similarity to ideal solution (TOPSIS), and viekriterijumsko
Information 2024, 15, 258 3 of 22

kompromisno rangiranje, a Serbian term for multicriteria optimization and compromise

solution (VIKOR), which are particularly relevant to the methodology employed in this
paper. Lastly, Section 2.4 examines other techniques related to the stock market, including
a novel decision-making approach for stock portfolio selection and the application of a
technical analysis approach. By structuring the literature review with a specific focus on
stock performance measurement, the aim is to furnish pertinent background information
and establish the necessity of the proposed combined methodology evaluated in this study.

2.1. General Studies on the Stock Market

Various studies shed light on different aspects of investment and financial markets. The
Investment Updates Report [1] highlighted the Kingdom of Saudi Arabia’s progressive shift
toward a digital, cashless economy driven by the dominance of point-of-sale transactions
using ATMs. The report also acknowledged the contribution of the Saudi Central Bank
(SAMA)’s successful decision making to the Kingdom’s exceptional financial position,
which is characterized by a substantial availability of monetary reserves totaling USD 4.457
billion in foreign currencies.
In Iran, Reid et al. [2] emphasized the importance of carefully considering regulatory
requirements and stakeholder expectations when choosing financial reporting approaches.
Mihail et al. [3] advocated for strengthening investor relations based on their positive corre-
lation with firm performance. Kartal [4] analyzed the effects of foreign investors on Turkish
stock indices, while Katsiaryna et al. [5] demonstrated the impact of distraction events
on stock return co-movement across different markets. Choiriyah et al. [6] investigated
the relationship between financial performance indicators and the stock prices of banking
companies on the Indonesia Stock Exchange (IDX). Their study examined variables such as
the return on assets (ROA), return on equity (ROE), net profit margin (NPM), earnings per
share (EPS), price-to-book ratio (P/B), and operating profit margin (OPM). The findings
revealed that collectively, these indicators significantly impact stock prices. However, only
the ROE and EPS demonstrated significant effects when considered individually, while the
ROA, NPM, and OPM did not. Shifting the focus to the Saudi Stock Exchange, Sharif [7]
(2019) examined the influence of foreign institutional investors on market dynamics. The
study revealed that foreign traders play a vital role in price discovery, returning prices to
their fundamental values. Finally, Wang et al. [8] proposed a novel approach to predicting
financial market movements using a one-dimensional convolutional neural network (CNN)
model. Their model employed customized CNN layers that scanned financial trading data
over time, allowing different data types (e.g., prices and volumes) to share parameters.
By extracting features automatically and avoiding biases caused by selecting technical
indicators and predefined coefficients, the proposed CNN model outperformed traditional
machine learning approaches regarding the average annual return and Sharpe ratio.
Vazakidis et al. [9] investigated the relationship between stock market development
and economic growth in France from 1965 to 2007, using a vector error correction model
(VECM) to determine how economic growth affects stock market development. Their
results suggest that economic growth promotes stock market development, while inter-
est rates have a negative effect. In their review of stock market prediction techniques,
Shah et al. [10] highlighted the challenges of predicting stock prices due to the random na-
ture of stock markets and the large number of influencing variables. Their study indicated
the potential of using machine learning for longer-term market predictions. Nazir et al. [11]
focused on Pakistan, showing that increasing market size and capitalization can spur
stock market development and arguing that such development is significant for economic
growth. Castanias [12] examined variability in stock market prices, challenging the as-
sumption that price changes are drawn from a stationary distribution and suggesting
that the arrival rate of broad economic information influences this variability. Ruzgar
et al. [13] analyzed Canadian banks’ stock prices during financial crises, finding that certain
indexes positively influenced bank stocks during these times. Ibrahim [14] explored how
stock market returns can predict actual output in Malaysia and found that stock returns
Information 2024, 15, 258 4 of 22

have a predictive power for the economy’s output in short forecasting periods. Lim and
Brooks [15] surveyed the efficiency of stock markets over time, highlighting a trend toward
time-varying market efficiency which suggests that the market’s predictability changes over
time. Fuchs-Schündeln and Funke [16] studied the impact of stock market liberalization,
finding that liberalization increases investment and GDP growth, especially in the presence
of strong institutional frameworks.
Sellin [17] examined the relationship between monetary policy and stock performance
and discovered that the relationship between actual stock prices and inflation is signifi-
cantly impacted by monetary policy. Zia-ur-Rehman et al. [18] investigated the connection
between macroeconomic factors and stock market volatility in the Pakistani context. Some
variables positively correlate with stock prices, whereas others have an adverse association.
Together, these studies demonstrate the multitude of factors influencing the behavior of
stock markets and the intricate yet vital role they play in economic development. They also
highlight how crucial it is to apply cutting-edge statistical techniques in order to compre-
hend these processes. Every study advances our grasp of the intricate linkages between
stock markets and economies, as well as our awareness of the ongoing need to monitor and
modify financial and economic policies in light of these relationships. Krutika et al. [19]
delved into the behavior of individual investors within the Indian stock market, examining
the risk–return relationship and the influence of emotions and cognitive errors on investor
decision making. The study aimed to gain insight into investors’ attitudes, perceptions, and
preferred sources of information, as well as the psychological factors that come into play in
different market situations. The research was based on a sample of 150 equity investors.
Another study by Felix et al. [20] evaluated the efficiency of price discovery within
the Nigerian Stock Exchange, focusing on the unique characteristics of stock markets in
developing countries. Svitlana et al. [21] delved into the globalization of the stock market
and provided a comprehensive analysis of its current state. The study considered world-
wide indicators and highlighted the conditions that hinder it from functioning effectively.
Sheilla et al. [22] examined the origin and development of the stock market in the United
States, focusing on major exchanges such as NYSE Euronext, NASDAQ, and the Chicago
Stock Exchange. The study emphasized the impact of stock market reforms implemented
following the crash of 1929. Covering a period from 2000 to 2014, Boers’ [23] study revealed
that conflict risk is not significantly priced into individual stock returns. This analysis con-
tributed to a more comprehensive understanding of the relationship between international
conflicts and stock market dynamics.

2.2. Applications of Mathematical Programming in the Stock Market

Brito [24] addressed the EU–EV model, which is based on expected utility, entropy,
and variance and is used to pick the best stocks and build portfolios. The model was
employed to select stocks from the PSI 20 index (the Portuguese Stock Index) and create
portfolios, with subsets of four equities proving particularly effective. Oladegio et al. [25]
explained how optimization techniques were applied to generate an optimal investment
in a chosen portfolio, delivering maximum returns with the fewest inputs. A redundancy
constraint was established using a linear programming model, with the robustness of the
resulting model to changes in input parameters determined through a sensitivity analysis.
Using an optimization method, a firm with USD 15,000,000 to invest in crude oil, mortgage
securities, cash crops, certificates of deposit, fixed deposits, treasury bills, and construction
loans was able to create the best possible investment portfolio considering all financial risks.
In 2016, Bilbao-Terol et al. [26] presented a sequential goal-programming model with fuzzy
hierarchies for sustainable and responsible (SR) portfolio selection. Their model allowed
SR investors to express preferences based on financial and SR objectives, offering decision
support in the SR investing process. The study’s implementation with real-world data from
the UK SR mutual fund market showcased the model’s applicability and advantages in
addressing goal conflicts.
Information 2024, 15, 258 5 of 22

Mokhtar et al. [27] comprehensively reviewed mathematical programming models

used for portfolio optimization, categorizing them as heuristic and exact solution methods
and indicating that most conventional methods fall into both categories. These methods
include stochastic programming and goal programming, among others. Manea et al. [28]
discussed applying optimization methods in statistics, emphasizing their importance in
finance. They explored the use of the simplex algorithm as a tool, highlighting its capacity
to facilitate optimal strategies for investing in the stock market. Wilkens and Zhu [29]
introduced a new approach to portfolio evaluation using linear programming. Their
method identified efficient portfolio frontiers and benchmarks for commodity trading
advisor returns, demonstrating that mathematical programming can directly influence
investment strategies. Yin [30] applied interval-valued fuzzy linear programming to
optimize stock portfolios, a method that allows investors to choose portfolios based on risk
tolerance, illustrating that higher risks might lead to higher returns.
Mulvey [31] explored optimization models in various financial planning activities, dis-
cussing the advantages and limitations of different approaches, such as dynamic stochastic
control and optimizing stochastic simulation models. Gupta et al. [32] transformed the
mean-variance model using fuzzy mathematical programming optimization, empowering
investors to choose between aggressive or conservative strategies while customizing their
portfolios. Wang [33] examined its applications in finance, ranging from pricing assets
to matching cash flows. The study showcased its evolution from linear to nonlinear pro-
gramming to address increasingly complex financial scenarios. Ziemba [34] evaluated the
role played by mathematical programming and stochastic methods in developing realistic
portfolio theories that consider constraints and transaction costs. Thomas’ work extended
to dynamic models applicable to asset location in real-world scenarios. Thomas [35] consid-
ered this view on the impact of mathematical programming to be far-reaching in finance.
The study emphasized its utilization in managing both assets and liabilities and its role in
long-term financial planning. The interplay of techniques grounded in optimization and
simulation underscores one of the cornerstones of modern financial strategies. Kaufmann
and Stenseth [36] delved into the utilization of programming in mathematical education,
exploring how it strengthens the foundation of financial education and indirectly enhances
problem-solving skills.
These studies showcase the usefulness of mathematical programming in devising
effective strategies for stock market investments. Applying these techniques in risk man-
agement, asset allocation, and return optimization enables the investor to meet market
conditions and requirements. Theoretical and practical evidence supports their improved
effectiveness in portfolio performance, as confirmed by research findings.

2.3. Applications of MCDM Methods in the Stock Market Context

MCDM is a subfield of operations research that addresses decision-making prob-
lems involving multiple criteria. The MCDM method aids decision-makers in selecting
alternatives based on various criteria. Numerous MCDM methods are currently avail-
able for different types of decision-making problems. Kornyshova and Salinsi [37] pre-
sented a comprehensive overview of existing approaches for selecting MCDM methods.
Mardani et al. [38] performed a state-of-the-art review of MCDM methods and method-
ologies, classifying articles based on journal name, publication year, application area, and
various MCDM methods and approaches. D-Sight is an example of an MCDM method
that employs the PROMETHEE method and multi-attribute utility theory. Emovon and
Oghenenyerovwho [39] provided a mathematical review of MCDM methods in mate-
rial selection. Recent MCDM methods and new tools proposed by scholars demonstrate
continued interest in this field.
In the stock market context, Vuković et al. [40] compared hybrid MCDM methods to
stock selection using modern portfolio theory, highlighting the superior risk-and-return
performance of the hybrid approach. Alamoudi and Bafail [41] discussed the BWM–RAPS
approach for evaluating and ranking banking sector companies on the Saudi Stock Market.
Information 2024, 15, 258 6 of 22

Bayda and Pamučar [42] identified the objective characteristics of MCDM methods under
uncertainty, with PROMETHEE and FUCA standing out as top performers. Jing et al. [43]
focused on achieving optimal stock portfolio selection by utilizing multicriteria decision-
making methods to maximize returns and minimize risk in companies listed on the Tehran
Stock Exchange. Peng et al. [44] proposed an MCDM method based on elimination and
choice, translating reality I with Z-numbers for stock selection. Gupta et al. [45] developed
a hybrid ranking technique to rank the sectoral stock indices of India’s National Stock
Exchange. Majumdar et al. [46] used MCDM to evaluate investment options on the Indian
equity market. Mills et al. [47] presented a hybrid MCDM method for asset allocation in
the Shanghai Stock Exchange. Marqués et al. [48] explored the use of MCDM methods in
financial management, focusing on ranking-based models. Pattnaik et al. [49] proposed
fuzzy MCDM methods for selecting the best insurance company for purchasing an online
term plan. Galankashi et al. [50] (2020) integrated financial and nonfinancial criteria using
the Fuzzy Analytic Network Process for portfolio selection on the Tehran Stock Exchange.
Nabeeh et al. [51] combined the analytical hierarchy process (AHP) with neutrosophic
techniques for decision making in IoT-based enterprises.
These studies provide valuable insights into the application of MCDM in various do-
mains and highlight the importance of considering MCDM processes. Song and Peng [52]
evaluated imbalanced classifiers in credit and bankruptcy risk prediction using an MCDM-
based method that simultaneously considered multiple performance metrics. The TOPSIS
method was used to rank the classifiers based on six evaluation criteria, and the combined
rankings provided by TOPSIS were found to be more reasonable than individual perfor-
mance criteria. Tey et al. [53] introduced the neutrosophic data analytic hierarchy process
(NDAHP) for decision making under uncertainty in supply chain management, utilizing
the method to evaluate the financial performance of petrochemical companies listed on
the Kuala Lumpur Stock Exchange. The results, validated using ranking tests, demon-
strated the accuracy of the NDAHP method. Aouni et al. [54] emphasized the importance
of incorporating criteria beyond mean and variance in portfolio selection, highlighting
that MCDM methods allow investors to consider a broader range of criteria and make
more informed decisions. Touni et al. [55] investigated the behavioral aspects of stock
selection using MCDM and the UTA-STAR method. They identified criteria (risk, return,
and liquidity) that influence investors’ stock investment decisions and provided insight
into investors’ decision-making behaviors. Makki and Alqahtani [56] captured the effect of
the COVID-19 pandemic on financial performance disparities in the energy sector using a
hybrid MCDM-based evaluation approach. This study contributed to understanding the
impact of the pandemic on the energy sector’s financial performance disparities.
Amudha et al. [57] reviewed the TOPSIS technique, a ranking technique which uses
comparisons with ideal solutions. This method is particularly effective as it can balance the
representation of different criteria for investment, thereby providing a realistic valuation of
stock options. Toloie-Eshlaghy et al. [58] extensively reviewed MCDM methods from 1999
to 2009, operating on the premise that these methods are widely implemented in various
fields, including finance. Their research categorized various MCDM methods, highlighting
the extensive use of these methods in complex decision-making. Baydaş et al. [59] evaluated
the financial performance of companies using several MCDM techniques. Their assessment
revealed that methods with low standard deviations in results and strong interdependence
with real-life financial performance, such as PROMETHEE and FUCA, could be rated
superior. Poklepović et al. [60] combined and modified two MCDM methods, producing di-
vergent results in stock selection by applying different MCDM methods, thereby increasing
reliability in stock valuation in the Croatian capital market.
Ho et al. [61] introduced the first decision-making model, representing a preference-
based novel MCDM model for portfolio selection aligned with the capital asset pricing
model (CAPM). The model addressed multiple investment criteria and their interrelation-
ships, providing a holistic portfolio management solution. Lee et al. [62] employed MCDM
techniques to assess stocks, utilizing the dividend and growth rate-oriented Gordon model.
Information 2024, 15, 258 7 of 22

They devised a method of factoring in complex variables and their interactions, which could
help investors understand why some stocks perform better than others. Baydaş et al. [63]
proposed objective criteria for a fair comparison of MCDM methods in financial perfor-
mance evaluation. They found that hybrid weighting techniques are more effective across
all periods compared to other methods. In a more recent study, Işık et al. [64] used MCDM
methods to assess the performance of food and beverage companies listed on the Istanbul
Stock Exchange, capturing significant differences in company performances by amalgamat-
ing various MCDM techniques.
Sotoudeh-Anvari [65] conducted a review of MCDM applications during the era
of COVID-19, showcasing the method’s flexibility in addressing complex, multifaceted
problems. Together, these studies indicate the flexibility and practicality of MCDM methods
in financial decision making. MCDM models provide a framework for analyzing different
investment alternatives in detail, considering even the most complex and, in some cases,
conflicting criteria. This indicates that MCDM is an important tool for financial analysts
and investors. Swagata et al. [66] explored the use of a novel hybrid MCDM technique
combining GRA, AHP, and TOPSIS for ranking stocks in the Indian IT sector based on
various performance indicators.
Mohamed et al. [67] conducted a pivotal evaluation in 2020, offering valuable in-
sights for manufacturing industries aiming to achieve investment goals, particularly in
revenue enhancement. The study evaluated the top 10 steel companies in Egypt based
on specified financial ratios, determining company ranking and demonstrating consistent
results. Mohammad et al. [68] proposed a hybrid MCDM technique that evaluates and
ranks banks based on the criteria of the balanced scorecard (BSC) and corporate social
responsibility (CSR) views. Abdolhamid et al. [69] evaluated Iranian automotive companies
using a hybrid approach based on accounting and economic value measures, using the
fuzzy analytical hierarchy process (FAHP) to determine criteria weights and rank the com-
panies. Meysam et al.’s [70] evaluation model was developed for the Iranian petrochemical
industry using the fuzzy AHP and FTOPSIS methods. Yitong et al. [71] used the Monte
Carlo (MC) model in the financial field to price financial options and multi-period income
guarantees, aiding in risk analysis, management, financial analysis, and marketing. The MC
simulation model provides a probability distribution of uncertain objects via probability
simulations and the statistical testing of random variable functions. This provides signif-
icant application value in financial derivative pricing and risk analysis. Seyed et al. [72]
proposed a new hybrid approach comprising a simplified group BWM and multicriteria
sorting to categorize options while considering decision-maker constraints. The proposed
approach was employed in an actual case study of stock portfolio selection on the Tehran
Stock Exchange.

2.4. Other Techniques Related to the Stock Market

Narang et al.’s [72] study introduced a novel decision-making approach for stock
portfolio selection. The approach integrated a fuzzy combined compromise solution (Co-
CoSo) with the Heronian mean operator to distribute capital among selected stocks, aiming
to achieve profitable returns with lower risk. By combining these methods, the authors
proposed a new decision-making model for stock selection and utilized particle swarm op-
timization to construct portfolios based on the rankings obtained. The results demonstrated
satisfactory returns compared to previous studies, suggesting the effectiveness of their
approach for stock portfolio selection. Paula and Iquiapaza [73] discussed investment fund
selection in the fixed income and stock segments, utilizing performance indicators such as
the Sharpe ratio and factor model alpha efficiency measured through data envelopment
analysis (DEA). Their study aimed to enhance knowledge of pension fund investment
decisions and promote confidence in using the Sharpe ratio as a technique for fund selection.
The study analyzed data from 369 funds from 2013 to 2018, considering multiple temporal
windows for portfolio selection.
Information 2024, 15, 258 8 of 22

Aljifri [74] comprehensively analyzed the Saudi Stock Price Index (TASI) and its
relationship with domestic macroeconomic variables, international variables, and global
oil prices. The study employed a multiple-equation time series analysis and considered
the impact of local and global financial crisis events. The findings indicated a long-run
relationship between the variables, with a positive equilibrium relation between TASI and
the S&P 500 and oil prices, but a negative relationship with the money supply. Manoharan
and Rajesh Mamilla [75] measured the occurrence and efficiency of various bullish reversal
candlestick patterns in predicting stock market trends. Their study focused on 17 stocks
on India’s leading market benchmark index, NIFTY 50, over the course of 16 years. Data
mining techniques with back-testing methodology were employed to identify the most
efficient candlestick patterns, including bullish engulfing, piercing line, and morning star.
Dayag and Trinidad [76] explored the use of price–earnings (P/E) ratios to assess the
investment potential of universal banks in the Philippines. The study analyzed the P/E
ratios of 10 leading banks and their relationships to overall stock market performance,
focusing on the ROE, the price–book value (PBV) ratio, and the Philippine Stock Exchange
(PSE) index as significant variables. Huang and Liu [77] investigated the application of a
multifactor model to understand correlations between various factors and stock returns on
the Chinese market. Their hybrid approach combined traditional statistical analysis and
machine learning techniques to enhance the accuracy of predicting stock returns.
Noor and Rosyid [78] examined the impact of financial ratios, specifically the loan
deposit ratio (LDR) and the ROE, on the share price performance of PT Bank Danamon
Indonesia. A regression analysis was used to explore the relationship between the ratios
and stock prices, with significant influences found for the capital adequacy ratio (CAR)
and LDR. Zhou et al. [79] proposed an approach for stock portfolio selection in a fuzzy
environment, incorporating varying risk attitudes, confidence levels, and value at risk
(VaR) into the decision-making process. Their study provided a framework for investors
to navigate stock selection while considering individual risk preferences. Paiva et al. [80]
introduced a decision-making model for day trading investments on the stock market,
combining machine learning methods with portfolio selection strategies. Their integrated
approach incorporated technical indicators as features in machine learning algorithms for
forecasting stock returns, optimizing portfolio allocation using mean-variance optimization,
and employing a genetic algorithm. This methodology aimed to provide a comprehensive
approach to decision making in financial trading.
Rajput et al. [81] devised various techniques to predict stock movements by analyzing
sentiments from social media using data mining techniques. All this leads to the conclusion
that stock prediction is an extremely complex task requiring the consideration of diverse
factors, which may enhance the accuracy and efficiency of how forecasts are presented.
Ou et al. [82] assessed the efficacy of predicting the movement of the Hang Seng Index
using 10 different data mining techniques. Their research found that among the tested
models, the support vector machine (SVM) and least-squares support vector machine (LS-
SVM) demonstrated outstanding performance, suggesting they hold the greatest potential
for enhancing prediction capability in this domain.
A. E. Khedr et al. [83] focused on using a sentiment analysis of financial news data
combined with historical price data to predict trends. Their model included news sentiment,
which significantly improved the accuracy of its predictions and illustrated the importance
of including qualitative data in the forecasting model. As Atsalakis [84] noted, there are a
plethora of such traditional forecasting methods, among which the ARIMA model is capable
of capturing the nonlinear dynamics of stock markets and offers significant predictive
power. However, applying these methods may seem somewhat tedious. While complicated,
these methods are of paramount importance for comprehending and effectively predicting
market behavior. Sharma et al. [85] articulated various methods applied in predicting
stock market trends, elaborating the shift from conventional models to state-of-the-art
machine learning and deep learning methodologies. Their study highlights the need for
continuous evolution in prediction methods to adapt to the volatile nature of stock markets.
Information 2024, 15, 258 9 of 22

In their review, Rouf et al. [86] underscored significant strides made in machine learning
prediction, which has seen substantial advancements in accuracy through leveraging
innovative algorithms and ensemble methods. This illustrates how dynamic characteristics
adapt over time to new technological advancements in stock market prediction. According
to Kumbure et al.’s [87] literature reviews, different types of variables and techniques have
been applied in machine learning for stock forecasting. Additionally, a bibliometric analysis
indicates emerging trends in the utilization of sophisticated tools for understanding and
predicting market trends.
Gandhmal et al. [88] summarized the various techniques used for predicting stock
markets, including fuzzy classifiers and neural networks, outlining their advantages and
disadvantages. This effort served to highlight gaps in the current research landscape and
proposed avenues for future research aimed at enhancing prediction accuracy. In another
study, Jabin [89] used artificial neural networks (ANNs) for short-term stock market predic-
tions, identifying a trend of high prediction accuracy. This achievement speaks volumes
about the potential of ANNs for capturing complex market relationships. Usmani et al. [90]
conducted a comparative study using different machine learning techniques to predict
the performance of the Karachi Stock Exchange. They found that external factors, such
as oil and foreign exchange rates, are critical, and a unifactorial approach cannot provide
accurate predictions. Bustos et al. [91] conducted a critical examination of the neuro-fuzzy
system in forecasting stock trends, calling into question the efficient market hypothesis.
Based on their research, they concluded that combining computational intelligence with
aspects of financial analysis offers numerous benefits in prediction.
In summary, these studies present a diverse and evolving range of techniques aimed at
understanding and predicting stock market trends. The combined methodology examined
in this paper offers various insights and avenues for enhancing prediction accuracy, which
is crucial for investment strategies in rapidly changing financial environments.
After conducting a literature review, several key factors influenced the decision to
use the BWM and TOPSIS in this study. The literature highlighted the importance of
considering multiple criteria and decision making under uncertainty in the stock market
context. MCDM methods such as the BWM and TOPSIS have been widely used in stock
market research due to their ability to manage multiple criteria and provide rankings or
evaluations of alternatives.
Additionally, previous studies have demonstrated the effectiveness of the BWM and
TOPSIS in various domains, including stock market analysis and portfolio selection. For ex-
ample, Alamoudi and Bafail [41] discussed applying the BWM–RAPS approach to evaluate
and rank banking sector companies on the Saudi Stock Market. Furthermore, Makki and
Alqahtani [56] evaluated financial performance disparities in the Saudi energy sector before,
during, and after COVID-19 using a hybrid MCDM approach, highlighting impacts and
providing insights for decision-makers. These studies provided evidence of the suitability
of the BWM and TOPSIS for evaluating and ranking stocks based on financial indicators.
The selection of financial indicators as criteria for evaluating stock performance was
driven by previous research findings highlighting the correlation between financial perfor-
mance indicators and stock prices. Choiriyah et al.’s [6] study on banking companies on
the Indonesia Stock Exchange (IDX) found that indicators such as the ROA, ROE, NPM,
EPS, P/B, and OPM significantly impact stock prices. This suggests that financial indica-
tors can provide valuable insights into the performance of stocks and their potential for
generating returns.
The objective of this study is to evaluate the performance of stocks based on financial
indicators using the BWM and TOPSIS methods. The details of the materials and methods
employed in this research are provided in the next section.

3. Materials and Methods

The structure of the suggested methodology for measuring and ranking stocks on
the Saudi Stock Market is shown in Figure 1. The proposed method consists of three
 employed in this research are provided in the next section.

3. Materials and Methods

Information 2024, 15, 258
The structure of the suggested methodology for measuring and ranking stocks on the
10 of 22
Saudi Stock Market is shown in Figure 1. The proposed method consists of three consec-
utive stages. In the first stage, an evaluation was conducted to evaluate the top five sectors
of the stock stages.
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approach. This involved identifying an alternative closest to the ideal solution and farthest
from the negative ideal solution in a multidimensional computing space. These rankings
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were based on the overall performance of the stocks, as determined by the weighted cri-
were based on the overall performance of the stocks, as determined by the weighted criteria
teria calculated
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previous stage. stage.

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market context. It ensures transparency and replicability by offering step-by-step
performance, including fundamental and stock market indicators.
The integration of subjective and objective factors captures qualitative and quantitative
aspects. The BWM allows decision-makers to express preferences while TOPSIS incorpo-
rates objective data, resulting in a balanced evaluation that enhances decision making. The
Information 2024, 15, 258 11 of 22

methodology provides actionable insights for investors through stock rankings and the
identification of top-performing sectors. This guidance supports investment strategies and
portfolio management. It introduces a novel application of the hybrid MCDM approach in
the context of the stock market. Adopting the BWM and TOPSIS brings a unique methodol-
ogy tailored to stock market evaluation, expanding the knowledge base and offering new
research opportunities.

3.1. Identifying Stocks and their Performance Criteria

Step 1 involves selecting stocks from the Saudi Stock Market, which encompasses over
210 listed stocks across 21 sectors.
Step 2 involves selecting the sectors likely to yield optimal returns. This selection
process is based on market capitalization, which reflects the size and value of a company.
The top five sectors with the highest degree of market capitalization in the Saudi Stock
Market are the energy sector, banks, materials, utilities, and telecommunications services.
Step 3 involves evaluating listed companies across sectors. The top 25% of stocks in
each sector are selected based on their market capitalization, so the number of companies
meeting the selection criteria will differ from sector to sector.
Once the stocks have been identified, Step 4 focuses on establishing criteria for evalu-
ating each stock. Investors rely on well-defined criteria to assess stocks and make informed
investment decisions. These criteria encompass various factors, such as profitability, market
conditions, and validation like asset turnover (ATO). By considering these diverse criteria,
investors can comprehensively understand a company’s potential and reduce the risks
associated with impulsive or uninformed investment choices.
A comprehensive analysis of numerous papers published on the subject emphasizes
the significance of stock selection criteria in the investment process. The criteria are
categorized into three main groups: profitability, market conditions, and validation. Each
category comprises sub-criteria, which are outlined in Table 1.

Table 1. Criteria for evaluating stocks.

Criteria Sub-Criteria *
ROE
Profitability ROA
Net profit margin
EPS
Market P/E
P/B
Validation ATO
* return on equity (ROE), return on assets (ROA), earnings per share (EPS), price–earnings (P/E) ratio, price-to-
book (P/B) ratio, and asset turnover (ATO).

3.2. Determining Criteria Weights

Step 5 focuses on assigning weights to the stock performance criteria. The BWM is the
appropriate method for MCDM problems. A survey was conducted involving 10 finance
experts who were actively involved in investment consulting in the Saudi Stock Market.
The purpose was to gather insights on how these experts assessed the importance of each
performance criterion. The participants had varying levels of experience and education,
which can be found in Table A1 in Appendix A. The data utilized in this study were
obtained from the main market website, which is the official website of the Saudi Market
Exchange (Tadawul) [92]. According to Munim et al. [93], the following steps explain the
calculation of weight criteria using the BWM.
Step 5.1: Formulate the problem; the decision-maker determines the evaluation criteria.
Step 5.2: Identify the best and worst criteria. The decision-maker determines the
best (most important) criterion and the worst (least important) criterion for use in the
comparison process to determine the vectors used in finding the criteria weights.
Information 2024, 15, 258 12 of 22

Step 5.3: Determine the preference for the best criterion over all other criteria. The
decision-maker ranks the best criterion’s importance over all other criteria using a 1–9
scale, where 1 indicates the same importance of the two criteria and 9 indicates the extreme
importance of one criterion over another. The resulting best-to-others vector will be

A B = ( ab1 , ab2 , ..., abn ), (1)

where abj expresses the preference for the best criterion b over criterion j, and the decision-
maker identifies the best criterion (b).
Step 5.4: Determine the preference for all other criteria over the worst criterion.
Step 5.3: The decision-maker ranks the importance of all other criteria over the worst
criterion using a scale from 1 to 9. This results in the other worst vector.

AW = ( a1w , a2w , ..., anw ), (2)

where ajw expresses the preference for criterion (j) over the worst criterion (w); the decision-
maker identifies the least important criterion (w).
Step 5.5: Estimate the optimal weight. This step aims to minimize the absolute differences:
 
wb − abj w j , w j − awj ww (3)

For all j to reach the optimal criteria weights, observe the following linear program-
ming model:
minδ L (4)
Subject to
wb − abj w j ≤ δ L for all j, (5)

w j − awj ww ≤ δ L for all j, (6)

∑ wj = 1 (7)
j

w j ≥ 0, for all j.
abj : represents the preference for the best criterion b over criterion j.
ajw : represents the preference for the criterion j over the worst criterion w.
wb : indicates the optimal weights of the best criteria.
ww : indicates the optimal weights of the worst criteria.
wj : indicates the optimal weights of the other criteria.
δL : indicates the consistency ratio of the comparison procedure in the BWM.
Step 5.6 Find the scores of alternatives. To find the final rank of the alternatives,
decision-makers rank the alternatives using a 1–9 score, where 1 indicates that the alter-
native was not implemented at all, and 9 indicates that it was the most implemented
alternative. Then, normalize these scored values by dividing each value by the maximum
value in its column. After that, multiply the normalized values by their respective weights.
Finally, taking the row-wise averages gives us the final ranking of the alternatives. The
following equation can represent this step:
n
Fi = ∑ wj xijnorm , (8)
j =1

Fi : the final score of the alternative i.

xijnorm : the normalized score of criterion j under alternative i.
Step 6: In this step, calculate the overall weight of each performance criterion.
Information 2024, 15, 258 13 of 22

3.3. Evaluating the Stocks’ Performance (Alternatives)

The last stage evaluates the stocks’ performance by ranking the alternatives from best
to least. The TOPSIS method is based on identifying an alternative closest to the ideal
solution and furthest to the negative ideal solution in a multidimensional computing space.
According to [94] (Kumar et al., 2020), the steps of the TOPSIS method can be given as
follows:
Step 7.1: The first stage includes establishing a decision matrix (DM).
 
L1 L1 . . . Ln
C1 
X X12 . . . X1n 
C  11
DM = 2 
  
X 21 X22 . . . X2n  or DM = Xij , (9)
.  
. . . . 
Cm
Xm1 Xm2 . . . Xmn

where j (j =1, 2, 3,. . ., n) is the criteria index, n denotes the number of potential sites available
in the DM, and i refers to the alternative index (i = 1, 2, 3,. . ., m). The elements L1 , L2 ,. . .., Ln
denote different criteria, while the elements (C1 , C2 ,. . ., Cm ) refer to alternative locations.
Step 7.2: Calculating the normalized decision matrix (NDM); the NDM represents the
relative performance of design alternatives.
s
m
NDM = Ri = xij / ∑ xij2 (10)
i =1

Step 7.3: Calculating the weighted decision matrix (WDM); the WDM is constructed
by multiplying each element of the column of (NDM) by its respective weight.

WDM = V = Vij = Wj × Rij (11)

Step 7.4: Identifying the positive ideal solution A+ and negative ideal solution A− ,
which are determined by the weighted decision matrix (WDM) defined in (11) above via
Equations (12) and (13) by using the following formulas:

A+= v1+ , v2+ , v3+
, . . . , v+


n ,
(12)
Where Vj+ = max vij | j ∈ J + , min vij | j ∈ J − .

A−= v1− , v2− , v3−
, . . . , v−


n ,
(13)
Where Vj− = min vij | j ∈ J + , max vij | j ∈ J − .

J + = 1, 2, 3, . . . , n) J + for the benefit criteria. (14)

J − = 1, 2, 3, . . . , n) J − for the cost criteria. (15)
where J + and J − in Equations (12) and (13) are associated with the beneficial and non-
beneficial attributes, respectively.
Step 7.5: Find the separation distance of each alternative from the ideal and non-ideal
solutions. v
u n  2
Si = t ∑ vij − v∗j , i = 1, 2, 3, . . . , m.
+ u
(16)
j =1
v
u n  2
Si− = t ∑ vij − v−
u
j , i = 1, 2, 3, . . . , m. (17)
j =1

where i = criterion index and j = alternative index.

Information 2024, 15, 258 14 of 22

Step 7.6: Calculate the relative closeness Ci of each location to the ideal solution and
the relative closeness of the alternative Aj concerning it.

Ci = Si− / Si+ + Si− ,

(18)

where 0 ≤ Ci ≤ 1; i=1, 2, . . ., m.
Step 7.7: Rank the preference order obtained or select the highest alternative. Different
alternatives can be arranged in descending order by the Ci values from the previous equation.
The hypothesis of this study is that the above-described methodology and its three
stages, utilizing the collected data, can be applied to achieve this study’s objective of
evaluating the performance of stocks based on financial indicators. The three stages are
concerned with identifying the stocks and their performance criteria, determining the
criteria weights, and evaluating their performance. This, in turn, results in a list of ranked
stocks based on the weighted criteria. The following section describes the application of
the proposed method and its results.

4. Results
This section is structured into three subsections which provide the outcomes of each
stage in the proposed methodology. Section 4.1 discusses Stage 1, which involves identi-
fying stocks and their performance criteria. Section 4.2 elaborates the findings of Stage 2,
which entails determining the weights of the criteria using the BWM approach. Finally,
Section 4.3 outlines the assessment and ranking of stock performance as alternatives in
Stage 3, employing the TOPSIS method.

4.1. Stage 1: Identify the Stocks and their Performance Criteria

Step 1 involves selecting the most suitable stocks (alternatives) from a wide range of
options after evaluating the Saudi Stock Market, which comprises 21 distinct sectors and
over 210 listed stocks.
Step 2 involves sector selection, a critical component of achieving optimal returns. The
selection process involves identifying and choosing the top five sectors in the Saudi Stock
Market based on their market capitalization in US dollars. Focusing on the sectors with the
highest market capitalization enhances investment potential and maximizes the chances
of achieving favorable outcomes. The top five sectors by market capitalization in the
Saudi Stock Market are energy, banks, materials, utilities, and telecommunications services.
Table 2 provides additional details about these sectors, including their market capitalization.

Table 2. The market value of sectors in the Saudi Stock Market (2022).

Sector Market Value (USD)

Energy 1,896,280,856,333.33
Banks 252,086,109,763.23
Materials 184,257,016,737.73
Utilities 60,392,126,915.87
Telecommunication Services 58,459,002,881.47

In Step 3, the evaluation of listed companies differs between sectors and is determined
by selecting the top 25% of stocks in each sector based on their market capitalization.
Consequently, the number of listed companies that meet the selection criteria will vary
depending on the sector. Table 3 shows each sector and the companies listed.
Information 2024, 15, 258 15 of 22

Table 3. The selected companies for each sector.

Sector Alternative
A1
Energy
A2
A3
A4
A5
A6
A7
Materials A8
A9
A10
A11
A12
A13
A14
Banks A15
A16
Telecommunication Services A17
A18
Utilities
A19

Step 4 involves identifying the criteria for evaluating each stock. Investors rely on well-
defined criteria to evaluate stocks and make informed investment decisions. In an extensive
analysis of a significant body of papers published on related topics, it was consistently
observed that stock selection criteria were consistently mentioned as a crucial aspect of
the investment process. The criteria were divided into three main categories: profitability,
market conditions, and validation. Each category included sub-criteria, as shown in Table 1.
Following these criteria enables investors to make more informed decisions, minimize risk
exposure, and enhance their chances of achieving investment objectives.

4.2. Stage 2: Determining Criteria Weights

Step 5 involves weighting the stock performance criteria. This step is undertaken
through the BWM by examining the preference for the best criterion over other criteria and
obtaining the preference for all criteria over the worst criterion. The overall weight for the
seven sub-criteria is determined using a survey conducted with 10 finance experts who
actively participate in investment consulting within the Saudi Stock Market context. The
survey’s primary objective was to gather insights regarding the experts’ evaluations of the
importance of each performance criterion. The criterion weights are calculated using the
BWM, and the summation of the weights should equal 1, as shown in Table 4.

Table 4. Estimating the optimal weights for the sub-criteria.

Sub-Criteria * ROE ROA Net Profit Margin EPS P/E P/B ATO Total
Weights 0.165 0.11 0.29 0.11 0.165 0.05 0.11 1
* return on equity (ROE), return on assets (ROA), earnings per share (EPS), price–earnings (P/E) ratio, price-to-
book (P/B), and asset turnover (ATO).

4.3. Stage 3: Evaluating the Stocks’ Performance (Alternatives)

Step 6, the final step, involves evaluating the performance of the selected stocks by
ranking the alternatives from best to least. The TOPSIS method identifies an alternative
closest to the ideal solution and farthest from the negative ideal solution in a multidimen-
sional computing space. This method considers the overall performance of the alternatives
based on the weighted criteria calculated in the previous stage. By incorporating these
Information 2024, 15, 258 16 of 22

methodologies, this study ensures a comprehensive evaluation of the alternatives and

their performance based on the specified criteria. Table 5 shows the results of ranking the
alternatives using the TOPSIS method.

Table 5. Calculating performance score.

Alternative ROE ROA Net Profit Margin EPS P/E P/B ATO Rank
A8 0.0922 0.0731 0.1096 0.0866 0.0090 0.0145 0.0337 1
A13 0.0749 0.0451 0.0386 0.0481 0.0103 0.0135 0.0591 2
A3 0.0330 0.0044 0.1338 0.0176 0.0227 0.0131 0.0017 3
A1 0.0690 0.0472 0.0546 0.0101 0.0153 0.0186 0.0437 4
A9 0.0414 0.0302 0.0727 0.0204 0.0089 0.0064 0.0210 5
A4 0.0215 0.0039 0.1230 0.0129 0.0161 0.0061 0.0016 6
A5 0.0241 0.0038 0.1182 0.0096 0.0176 0.0074 0.0016 7
A16 0.0335 0.0240 0.0582 0.0107 0.0254 0.0149 0.0208 8
A7 0.0320 0.0164 0.0480 0.0104 0.0222 0.0124 0.0174 9
A19 0.0308 0.0175 0.0374 0.0100 0.0194 0.0105 0.0236 10
A18 0.0113 0.0062 0.0435 0.0149 0.0082 0.0016 0.0072 11
A2 −0.0141 −0.0033 −0.0041 −0.0027 −0.0207 0.0051 0.0410 12
A15 0.0104 0.0053 0.0356 0.0041 0.0161 0.0029 0.0076 13
A6 0.0146 0.0104 0.0173 0.0226 0.0210 0.0054 0.0305 14
A11 −0.0155 −0.0087 −0.0231 −0.0034 −0.0214 0.0058 0.0190 15
A17 0.0148 0.0062 0.0605 0.0087 0.0935 0.0243 0.0051 16
A14 0.0157 0.0070 0.0207 0.0047 0.0485 0.0133 0.0172 17
A10 0.0057 0.0049 0.0122 0.0030 0.0732 0.0073 0.0203 18
A12 0.0050 0.0049 0.0000 0.0015 0.0775 0.0068 0.0000 19

The results of applying the proposed hybrid MCDM approach using the BWM and
TOPSIS attained this study’s objective. The results in the first stage of the proposed
approach helped identify the top five sectors in the Saudi Stock Market and their top 25%
of stocks based on their market capitalization. It also helped determine the main financial
performance criteria and their relevant sub-criteria, based on which the evaluation was
conducted. Based on expert input, the BWM determined the sub-criteria weights in the
second stage. In the third stage, the TOPSIS method was used to evaluate the stocks’
performance and revealed their rankings. Therefore, based on the achieved results, the
hypothesis is approved. The following section provides a discussion of the achieved results.

5. Discussion
In the past five years, the Saudi Stock Market has undergone significant transformation,
with the top five sectors in market capitalization demonstrating notable growth compared
to other sectors. This growth has made these sectors attractive to investors seeking to assess
and analyze the constituent companies within each sector. Various criteria were considered
to evaluate and rank the value of these companies. An extensive review of published
papers emphasized the importance of stock selection criteria in the investment process.
These criteria can be broadly categorized into three main groups: profitability, market
conditions, and validation. To gain insights from experts in the field, seven academics from
the Faculty of Economics, Engineering, and Business who specialized in finance and were
actively involved in investment consulting in the Saudi Stock Market were consulted. The
findings revealed that profitability was deemed the most critical criterion, carrying a weight
of 56.5%. Market conditions and validation were weighted at 32.5% and 11%, respectively.
Information 2024, 15, 258 17 of 22

Hybrid MCDM methods were utilized in this study to evaluate seven criteria for the
Saudi Stock Market. The aim was to establish a comprehensive performance evaluation
framework by employing the BWM to assign weights to the criteria and use the TOPSIS
method to rank the alternatives. According to the TOPSIS results, A8 emerged as the top-
ranking company. When considering the weighted criteria for profitability, A8 showcased
exceptional performance in terms of its ROE, ROA, and NPM, with returns of 47%, 37%, and
52%, respectively. Next in the ranking were A13 and A3. A13 exhibited strong performance
by the end of 2023, with a 39% ROE and an 18.6% NPM. A3 boasted the highest NPM at
64.5%, but its lower ROA of 2.2% affected its overall ranking.
In contrast, A12 ranked the lowest in both ROE (2.6%) and ROA (2.5%). Notably, the
bank sector displayed the highest NPM ratios compared to other sectors, with A3, A4, and
A5 recording percentages of 64.5%, 59%, and 57%, respectively. Similarities and differences
can be observed by comparing the findings of this study with previous research in the
field. Like other studies, this research underscores the importance of financial indicators
such as the ROE, ROA, NPM, EPS, P/E, P/B, and ATO in evaluating stock performance.
However, it is essential to note that some disparities may arise due to variations in sample
size, period, the inclusion of other criteria, or methodological differences.
Our evaluation of stocks on the Saudi Stock Market using an MCDM approach under-
scores the importance of providing robust policy implications that can guide stakeholders,
policymakers, and regulatory bodies in making informed decisions. Our study’s primary
objective was to offer investors a reliable evaluation methodology for informed investment
decisions, and we acknowledge the significance of extending its policy implications.
One key policy implication of our research is the identification of sectors and stocks
with strong financial performance. By considering multiple financial criteria such as
the ROE, ROA, NPM, and ATO, we identified sectors that exhibit high return potential.
Policymakers can utilize this information to develop targeted policies and initiatives to
foster growth and investment in these sectors. Such interventions can contribute to the
country’s overall economic development by creating a favorable environment for these
sectors to thrive.
Moreover, our findings shed light on the performance of the bank sector, which
displayed the highest NPM ratios compared to other sectors. Policymakers and regulators
can utilize this insight to enhance the banking industry’s stability and efficiency. This may
involve implementing regulatory measures to ensure sound financial practices and mitigate
risks. Additionally, policymakers can consider introducing incentives and initiatives that
encourage further investments in the banking sector, fostering its growth and contribution
to the economy.
This study aligns with the Vision 2030 initiative, which aims to promote economic
diversification and increase the private sector’s contribution to the GDP. By identifying
and evaluating stocks with high return potential, our research provides valuable guidance
for policymakers and investors seeking to strengthen the private sector. Policymakers can
leverage our findings to develop targeted strategies and policies that facilitate investment,
entrepreneurship, and innovation in sectors with significant growth prospects. This can
contribute to realizing the Vision 2030 goals by fostering a dynamic and competitive
private sector.
Similarly, applying the TOPSIS method to rank alternatives based on the established
criteria weights provided a robust evaluation framework. The effectiveness of TOPSIS in
decision making, including stock market analysis, is supported by the work of Hwang
and Yoon [95], in which incorporating actual market data into the analysis improved the
validity and practical applicability of the results. This is consistent with the findings of
previous studies, such as [96–98], which underscored the importance of using actual data
to enhance the reliability of decision-making methods in stock market analysis.
Information 2024, 15, 258 18 of 22

6. Conclusions
This research study aimed to evaluate stocks in the Saudi Stock Market using a
hybrid MCDM approach and provide investors and stakeholders with a robust evaluation
methodology for making informed investment decisions. The primary objective was to
enhance the reliability and accuracy of stock evaluation while reducing bias.
This study employed the BWM and TOPSIS to evaluate stock performance based on
various financial criteria, including the ROE, ROA, NPM, and ATO.
This study’s findings revealed that the banking sector displayed the highest NPM
ratios compared to other sectors. By implementing hybrid MCDM-based methods, this
research provides a foundation for a deeper exploration and analysis of additional aspects
of the Saudi Stock Market’s performance.
This study adds twofold value to scientific research. First, it contributes to the existing
literature by applying a hybrid MCDM approach to evaluating stocks on the Saudi Stock
Market. Second, the combination of the BWM and TOPSIS provides a comprehensive
evaluation methodology that considers multiple criteria simultaneously, enabling investors
to make more informed decisions.
Secondly, this study offers a systematic approach to stock evaluation and selection
in the Saudi Stock Market. It utilizes financial criteria and MCDM techniques, which can
assist investors in maximizing their returns.
In conclusion, this research study contributes to the knowledge of MCDM methods
and their application in evaluating Saudi stocks. The findings and insights gained from this
study can guide investors in their decision-making processes and optimize their strategies
for investing in the dynamic and rapidly evolving Saudi Stock Market.

Author Contributions: Conceptualization, A.T.A. and A.Y.A.; methodology, A.T.A., A.Y.A. and
A.A.M.; software, A.T.A., A.Y.A., A.A.M. and M.A.B.; validation, A.T.A., A.Y.A., A.A.M. and M.A.B.;
formal analysis, A.T.A., A.Y.A., A.A.M. and M.A.B.; investigation, A.T.A., A.Y.A., A.A.M. and
M.A.B.; resources, A.T.A., A.Y.A., A.A.M. and M.A.B.; data curation, A.T.A., A.Y.A. and M.A.B.;
writing—original draft preparation, A.T.A., A.Y.A. and A.A.M.; writing—review and editing, A.T.A.,
A.Y.A., A.A.M. and M.A.B.; visualization, A.T.A., A.Y.A. and A.A.M.; supervision, A.Y.A. and A.A.M.;
project administration, A.T.A., A.Y.A., A.A.M. and M.A.B. All authors have read and agreed to the
published version of the manuscript.
Funding: This research received no external funding.
Institutional Review Board Statement: Not applicable.
Informed Consent Statement: Informed consent was obtained from all subjects involved in the study.
Data Availability Statement: The data collected in this study were obtained from the Saudi market
exchange (Tadawul) via the website Main Market: https://www.saudiexchange.sa/wps/portal/
saudiexchange/ourmarkets/main-market-watch?locale=en.
Acknowledgments: The authors would like to acknowledge and thank all those who participated in
this study.
Conflicts of Interest: The authors declare no conflicts of interest.

Appendix A

Table A1. Stock market expert profiles.

Expert Number Qualification Sector Years of Experience *

1 Ph.D. Capital Market Authority 16
2 Master’s degree Public Investment Fund 15
3 Ph.D. Saudi Exchange 12
Information 2024, 15, 258 19 of 22

Table A1. Cont.

Expert Number Qualification Sector Years of Experience *

4 Bachelor’s degree Ministry of Investment 10
5 Ph.D. Public Investment Fund 11
6 Master’s degree Capital Market Institutions 13
7 Bachelor’s degree Ministry of Investment 9
8 Master’s degree Saudi Exchange 9
9 Bachelor’s degree Capital Market Institutions 8
10 Master’s degree The Financial Academy 7
* Years of experience specific to stock market-related roles only.

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