Amphenol Corp. Class A (NYSE:APH) Identified as a Top Quality Stock by Caviar Cruise Screen

Amphenol Corp. Class A (NYSE:APH) has appeared as a notable candidate for quality investors after a screen based on the Caviar Cruise strategy. This approach, inspired by Belgian author Luc Kroeze’s work, focuses on finding companies with solid past performance, strong profitability, efficient use of capital, and lasting financial condition. The method favors measurable data that indicate superior operations and lasting strength, making it a good fit for buy-and-hold investors looking to own high-grade businesses for the long term.

Historical Growth and Profitability

Amphenol shows outstanding past growth, a key part of the Caviar Cruise strategy, which looks for companies with steady increases in both sales and earnings. Over the last five years, Amphenol has reached:

• Revenue growth (5Y CAGR): 14.42%
• EBIT growth (5Y CAGR): 14.84%

These numbers are not only above the screen’s minimum requirement of 5% but also show that EBIT growth has been higher than revenue growth, pointing to better operational effectiveness and possible pricing strength. This fit with the strategy’s growth filters highlights Amphenol’s capacity to grow its main operations with profit, a characteristic highly appreciated by quality investors.

Return on Invested Capital

The company’s return on invested capital excluding cash, goodwill, and intangibles (ROICexgc) is a notable 66.79%, greatly exceeding the screen’s 15% requirement. ROIC is a vital measure in quality investing, as it assesses how well a company produces profits from its invested capital. Amphenol’s very high ROIC points to excellent use of capital and a lasting competitive edge, supporting its fit for long-term ownership.

Financial Health and Cash Flow

Amphenol displays solid financial condition, with a debt-to-free cash flow ratio of 2.86, much lower than the screen’s maximum of 5. This shows the company could pay off all its debt in less than three years using its present free cash flow, indicating a manageable amount of debt and financial adaptability. Also, its five-year average profit quality—measured as free cash flow to net income—is 95.61%, above the 75% mark. This high rate of turning accounting profits into cash shows earnings strength and lessens dependence on outside funding, both important for quality investors.

Fundamental Analysis Overview

Amphenol’s fundamental report gives it a score of 7 out of 10, showing strong points in profitability and growth, but with some notes in financial condition. Important points consist of:

• Profitability score of 9/10, with top-tier margins and returns.
• Growth score of 8/10, backed by solid past and predicted future growth in sales and earnings.
• Health score of 5/10, mentioning a higher share count and debt amounts, though ability to pay debts stays firm.
• Valuation score of 4/10, as the stock seems costly on common multiples but might be reasonable due to growth and profitability.

For a complete summary, readers can see the full fundamental analysis report.

Alignment with Quality Investing Principles

Beyond numbers, Amphenol fits with several non-measured parts of quality investing. The company works worldwide in interconnect and sensor systems, providing for various industries such as automotive, aerospace, and communications—areas with long-term growth directions. Its way of doing business is fairly straightforward, concentrating on necessary parts for electronic and electrical systems. Also, its reliable performance indicates skilled leadership and possible competitive benefits, like technical knowledge and customer connections.

Conclusion

Amphenol Corp. stands as a solid candidate for quality investors, satisfying strict number-based standards for growth, profitability, and financial condition. Its high ROIC, strong cash flow production, and past performance suggest a well-run company with lasting benefits. While price may cause some hesitation, quality investors usually favor business quality over near-term cost, if the company shows persistent strengths.

For those wanting to look into other companies that pass the Caviar Cruise screen, more outcomes are available here.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Readers should conduct their own research and consult with a financial advisor before making investment decisions.