Companhia Energética de Minas Gerais SA ADR (NYSE:CIG.C) – A Quality Utility Stock Worth Considering

Companhia Energética de Minas Gerais SA ADR (NYSE:CIG.C) was identified by our Caviar Cruise quality stock screener, which focuses on companies with strong profitability, financial health, and sustainable growth. The Brazilian utility firm stands out due to its solid fundamentals, efficient capital allocation, and reasonable valuation.

Key Strengths

• High Return on Invested Capital (ROIC) – With an ROIC (excluding cash and goodwill) of 16.33%, CIG.C demonstrates efficient use of capital, outperforming many peers in the electric utilities sector.
• Strong Profit Quality – The company converts 139.7% of net income into free cash flow (5-year average), indicating high earnings reliability and financial flexibility.
• Healthy Debt Management – A Debt-to-Free Cash Flow ratio of 3.59 suggests the company can repay its debt in under four years using current cash flows, well within the acceptable range for quality stocks.
• EBIT Growth Outpacing Revenue – Over the past five years, EBIT grew at 17.37% annually, signaling improving operational efficiency and pricing power.

Fundamental Analysis Summary

Our fundamental report assigns CIG.C a rating of 5 out of 10, reflecting a mixed but promising profile:

• Profitability: Above-average margins, with a 17.25% profit margin ranking better than 83% of industry peers.
• Valuation: Trading at a P/E of 6.36, the stock appears undervalued compared to both industry and S&P 500 averages.
• Dividend: A 2.17% yield with a strong growth history, though sustainability concerns exist due to a high payout ratio.
• Growth: Past revenue and EPS growth have been solid, but near-term earnings are expected to decline.

Why It Fits a Quality Strategy

CIG.C operates in a stable industry with regulated cash flows, reducing recession risk. Its high ROIC and cash conversion suggest disciplined capital allocation, while its manageable debt levels provide financial resilience. While future earnings growth may slow, the company’s fundamentals align with long-term quality investing principles.

For more quality stock ideas, explore our Caviar Cruise screener.

Disclaimer
This is not investment advice. Always conduct your own research before making investment decisions.