CIA ENERGETICA DE-SPON ADR (NYSE:CIG.C) Identified as a Quality Long-Term Investment by Caviar Cruise Screen

Companhia Energética de Minas Gerais SA (NYSE:CIG.C) has been identified by an investment screening method created to find good companies suitable for long-term investment. This process, called the Caviar Cruise screen, is based on Quality Investing ideas, which favor businesses with solid fundamentals, steady growth, and good use of capital. The method uses measurable numbers that show a company's potential to create lasting profits and keep its competitive position over long times, making it a good fit for investors using a buy-and-hold plan.

Screening Method and Important Measures

The Caviar Cruise screen uses a process with several filters to find quality stocks. The basic version of the screen uses a number of fundamental measures that CIG.C seems to meet:

• Return on Invested Capital (ROIC): The screen looks for a ROIC, without cash, goodwill, and intangibles, above 15%, showing good use of capital. CIG.C has a solid ROIC of 15.31%, suggesting the company creates good returns from its main business investments.

• Debt Management: With a Debt to Free Cash Flow ratio of 3.91, CIG.C is below the acceptable limit of 5. This number indicates the company could pay off all its debt in less than four years using its present free cash flow, showing careful financial management.

• Profit Quality: The screen finds companies that turn accounting profits into actual cash flow, needing a five-year average profit quality above 75%. CIG.C is well above this level with a notable 139.72%, indicating high cash creation compared to reported earnings.

• EBIT Growth: The method favors companies with steady earnings growth, specifically needing 5-year EBIT compound annual growth above 5%. CIG.C shows significant business growth with a 17.37% EBIT growth rate over this time.

Fundamental Review Summary

The full fundamental analysis report for CIG.C gives the company a total rating of 6 out of 10, placing it as a mixed but possibly interesting option for investors focused on quality. The review shows several positive points together with some points of caution.

The company does well in profitability measures, getting a score of 7 out of 10 in this group. It shows high returns on assets (10.26%) and equity (22.84%), doing better than about 96% of other companies in the electric utilities sector. The profit margin of 15.50% also compares well within the industry, although operating and gross margins are somewhat weaker than sector competitors.

Looking at valuation, CIG.C seems to be priced attractively with a score of 7 out of 10. The stock has a price-to-earnings ratio of 6.23, much lower than both industry and S&P 500 averages, hinting at possible undervaluation. Likewise, enterprise value to EBITDA and price-to-free cash flow ratios suggest a cheaper price compared to most industry peers.

The financial health review presents a more average picture with a score of 5 out of 10. While the debt-to-equity ratio of 0.45 shows a good mix of debt and equity financing, and the debt-to-free cash flow ratio is still good, current and quick ratios of 1.00 point to possible difficulties in covering short-term bills even though they are similar to industry standards.

Growth outlook is the most cautious area with a score of 4 out of 10. While past revenue and EPS growth have been good at 9.33% and 26.37% respectively, analysts expect lower EPS (-21.51%) and small revenue growth (2.25%) in future years, signaling possible challenges.

View the complete fundamental analysis report for full details on CIG.C's financial situation and investment profile.

Quality Investment Points

For quality investors, CIG.C offers an interesting situation that matches several main ideas of the Caviar Cruise method. The company's high ROIC shows good capital use, a key part of quality investing. The outstanding profit quality score suggests dependable cash flow creation, lessening reliance on accounting numbers alone. The acceptable debt level compared to cash flow gives financial steadiness, important for long-term holding.

The electric utility type of CIG.C's business fits with quality investing likes for companies in necessary services with stable demand. As a provider of electricity distribution and generation in Brazil's Minas Gerais state, the company gains from fairly predictable income, though investors should think about risks from geographic focus and regulatory factors.

Finding Other Options

The Caviar Cruise screening method can produce several possible quality investment options across different sectors and markets. Investors wanting to find other companies that meet these strict quality standards can use the full screening tool to look at more investment possibilities that fit this strategy.

Disclaimer: This analysis is for information only and is not investment advice, a suggestion, or support for any security. Investors should do their own research and talk to financial advisors before making investment choices. Past results do not ensure future results, and all investments have risk including the possible loss of the original investment.