Atmus Filtration Technologies (NYSE:ATMU) Passes the "Caviar Cruise" Quality Investing Screen

For investors aiming to assemble a portfolio of lasting, well-managed businesses, the quality investing philosophy offers a useful framework. This method centers on finding companies with durable competitive strengths, reliable profitability, and sound financial condition, with the goal of owning them for an extended period. One organized way to find these companies is the "Caviar Cruise" stock screen, which selects for firms displaying high returns on capital, good cash flow conversion, and careful growth. A recent company meeting this screen's criteria is Atmus Filtration Technologies Inc (NYSE:ATMU).

Core Profitability and Capital Efficiency

The central requirement of the Caviar Cruise screen is a high Return on Invested Capital (ROIC), which calculates how well a company produces profits from the capital it uses. A high ROIC is a sign of a good business, showing a lasting competitive edge and able management. The screen demands an ROIC (leaving out cash, goodwill, and intangibles) greater than 15%.

• Atmus's ROICexgc: 31.06% This number is well above the screen's minimum and puts Atmus in the highest group of its industry, doing better than about 97% of similar companies in the Machinery sector. This high return implies the company's filtration products and aftermarket services create significant value from its business assets.

Financial Resilience and Cash Flow Strength

Quality investors look for financial steadiness. The Caviar Cruise process checks this using two main filters: Debt-to-Free Cash Flow and Profit Quality. A reasonable debt level compared to cash generation means a company can handle slow periods and finance its own expansion, while high profit quality verifies that reported earnings are supported by actual cash.

• Debt-to-Free Cash Flow: 4.54 This number means it would take Atmus about 4.5 years to pay off all its debt using its present yearly free cash flow, which is inside the screen's allowed limit of under 5. It shows a debt load that is acceptable and similar to industry counterparts.
• 5-Year Average Profit Quality: 84.66% Profit Quality calculates the portion of net income changed into free cash flow. Atmus's five-year average of almost 85% is above the screen's 75% requirement. This points to a reliable skill in changing profits into cash, an indicator of operational effectiveness and trustworthy earnings.

Track Record of Growth

While history does not assure the future, a pattern of stable growth in core profits is a positive feature for a long-term investment. The Caviar Cruise screen searches for a five-year compound annual growth rate (CAGR) in EBIT (earnings before interest and taxes) of at least 5%, favoring EBIT growth that is faster than revenue growth—an indicator of better operational scale and pricing ability.

• 5-Year EBIT CAGR: 8.49% Atmus has achieved EBIT growth that is clearly higher than the 5% standard over the last five years. This shows a capacity to increase its core operating profit over a significant time.

High-Level Fundamental Overview

An examination of Atmus's wider fundamental analysis report supports the image created by the screen's specific measures. The company gets an overall fundamental rating of 6 out of 10. Its leading feature is profitability, where it gets an 8/10, fueled by high returns on equity and invested capital that are among the best in its industry. Margins are good and have gotten better.

The financial health score is a middle 5/10. Although the company has a strong Altman-Z score pointing to low bankruptcy risk and acceptable liquidity ratios, its debt-to-equity ratio is higher than industry counterparts, a detail for investors to consider. For growth, Atmus scores 5/10, with moderate past revenue growth but forecasts for a small increase in earnings per share growth in the next few years. Valuation gets a 4/10; its P/E ratio seems fair compared to both the S&P 500 and its industry, but a high PEG ratio implies the market has already accounted for much of its growth outlook.

Investment Thesis for Quality Investors

Atmus Filtration Technologies presents a profile that matches several quality investing ideas. As a top designer and maker of filtration products under the known Fleetguard brand, it gains from a repeat revenue source through necessary aftermarket parts for trucks and heavy equipment—a type of business that is often stable through different economic conditions. Its notable ROIC and high profit quality suggest it has competitive strengths in its specialty and is managed effectively. The acceptable debt-to-cash flow ratio offers a buffer. For an investor using the Caviar Cruise screen as a first step for investigation, Atmus displays the numerical signs of a financially stable and very profitable company.

Find Other Quality Candidates The Caviar Cruise screen is built to methodically find companies with sound fundamental traits. You can see the present screen settings and look for other possible quality investment options by going to the Caviar Cruise stock screener.

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Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any security. Investing involves risk, including the potential loss of principal. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.