Brady Corporation (NYSE:BRC) Passes the "Caviar Cruise" Quality Investing Screen

For investors looking to assemble a portfolio of lasting, high-standard businesses, the quality investing method offers a useful framework. This approach centers on finding companies with durable competitive strengths, sound financial condition, and reliable earnings, traits that let them increase value over many years. A functional tool for this process is the "Caviar Cruise" stock screen, which measures important quality signs like steady revenue and profit increase, high returns on invested capital, strong free cash flow production, and a careful balance sheet. The screen aids in finding businesses that are not only doing well now, but are built to succeed.

One firm that currently meets this strict screen is Brady Corporation - Class A (NYSE:BRC). The Wisconsin-based maker of identification and safety products seems to display several features that quality investors value. We will look at how Brady matches the main filters of the Caviar Cruise method.

Match with Quality Investing Standards

The Caviar Cruise screen stresses past financial performance and effective capital use. Brady Corporation's operational and financial record shows a good match with these ideas.

• Profitability and Capital Use: A central part of quality investing is a high Return on Invested Capital (ROIC), which shows how well a company produces profits from its capital. The screen asks for an ROIC (leaving out cash, goodwill, and intangibles) over 15%. Brady greatly exceeds this level with a number of 41.7%, showing outstanding efficiency. This high return implies the company has pricing strength, cost advantages, or other competitive edges that let it earn better profits on each dollar used.

• Reliable and Good Earnings: The screen seeks steady increase in Earnings Before Interest and Taxes (EBIT), which shows core business performance. Brady's 5-year EBIT Compound Annual Growth Rate (CAGR) of 10.5% easily beats the 5% minimum. Also, the screen values "profit quality," the change of accounting earnings into actual free cash flow. Brady's 5-year average Profit Quality of 93.8% is very good, indicating that almost all its net income becomes usable cash. This gives the financial ability to fund growth, pay dividends, or lower debt without needing outside money.

• Careful Financial Management: A quality company should not have too much debt. The Caviar Cruise screen uses the Debt-to-Free Cash Flow ratio to see how fast a company could pay its debts. A ratio under 5 is seen as sound. Brady's ratio of 0.72 is very good, meaning it could in theory pay off all its debt in under nine months using its present free cash flow. This very solid balance sheet greatly lowers financial risk and gives a cushion in economic slowdowns.

Basic Health and Value Overview

Beyond the specific screen standards, a wider view of Brady's basics supports its quality profile. According to a detailed fundamental analysis report, the company gets an overall score of 7 out of 10, with special strength in profitability and financial condition.

• Profitability is a main strength, with margins better than most in its industry. Its Operating Margin of 16.8% and Profit Margin of 12.7% are in the top group of the Commercial Services & Supplies sector.
• Financial Condition is sound. The report notes an Altman Z-Score showing very low bankruptcy risk and confirms the excellent debt situation, stating the company is "not too dependent on debt financing."
• Value seems fair. While quality often has a higher price, Brady's Price-to-Earnings ratio of 16.8 is below both the industry average and the wider S&P 500. The analysis finds the stock is not priced too high, which is an important point for investors wanting to buy a good company at a sensible price.

A Candidate for More Study

Brady Corporation's success on the Caviar Cruise filters points to its standing as a possible quality investment. It shows high returns on capital, changes profits effectively into cash, works with a careful balance sheet, and has provided reliable earnings growth. These are the signs of a business made to last. For investors using a buy-and-hold method, such features are vital, as they suggest the company can maintain and raise its inherent value over many years.

The Caviar Cruise screen is a useful first step for finding companies with quality features. You can review other companies that currently meet this screen's standards by viewing the full screen results here.

---

Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer to buy or sell any security. The data shown is based on public information and specific screening rules. Investors should do their own complete study and think about their personal financial situation and risk comfort before making any investment choices.