For investors aiming to assemble a portfolio of superior companies for the long term, the principles of quality investing offer a strict framework. This method centers on finding businesses with lasting competitive strengths, sound financial condition, and a confirmed capacity to produce high returns on capital. The "Caviar Cruise" stock screen, drawn from the quality investing method, uses a set of quantitative filters to separate these companies. It highlights consistent revenue and profit increase, high returns on invested capital, solid free cash flow conversion, and a prudent balance sheet. The aim is not to locate short-term discounts, but to locate excellent businesses deserving of a long-term holding.
One company that now meets this strict screen is CorVel Corp. (NASDAQ:CRVL). The company offers specialized risk management, healthcare cost containment, and claims management services, mainly in the workers' compensation and auto liability insurance sectors. Using the Caviar Cruise standards, we can review how CorVel's financial profile matches the signs of a quality investment.
A Base of Profitable Increase
The Caviar Cruise screen first looks for companies with a shown record of increase, needing a minimum 5% compound annual growth rate (CAGR) for both revenue and EBIT (earnings before interest and taxes) over five years. It also requires that EBIT increase surpasses revenue increase, pointing to better operational efficiency and possible pricing strength.
CorVel shows a solid record here:
- The company's 5-year EBIT CAGR is a strong 14.76%, well above the 5% minimum.
- While the exact 5-year revenue CAGR number is not in the given data, the fundamental report states that revenue has been increasing by 8.62% yearly on average over recent years, showing steady top-line growth.
- The need for EBIT increase to be greater than revenue increase is inherently confirmed by the company's widening profit margins, which we will review next.
This steady and profitable increase is a central idea of quality investing, as it indicates a business that is not only gaining market position but also becoming more efficient at turning sales into earnings.
Superior Profitability and Capital Use
Maybe the most important filter in the quality investing set is a high Return on Invested Capital (ROIC). The Caviar Cruise screen requires an ROIC (excluding cash, goodwill, and intangibles) above 15%. This gauge assesses how well a company uses its capital to produce profits; a high ROIC often points to a lasting competitive edge.
CorVel's results here are superior:
- The company's ROICexgc is a notable 78.64%, greatly exceeding the 15% requirement.
- This is supported by the fundamental analysis report, which gives a profitability rating of 9 out of 10 and says that CorVel's ROIC of 28.20% is better than 99% of similar companies in the Health Care Providers & Services industry.
A business that can create such high returns on capital is usually one that needs little extra investment to grow, letting more cash return to shareholders or be put back to work at similarly high rates, a positive cycle highly valued by quality investors.
Financial Strength and Cash Flow Nature
Quality investing emphasizes financial security and the nature of earnings. The Caviar Cruise screen applies this through two main filters: a Debt-to-Free Cash Flow ratio under 5 and an average Profit Quality over five years above 75%. The first makes sure the company can easily handle its duties, while the second verifies that accounting profits are becoming real, usable cash.
CorVel's financial condition is very clean:
- Debt/FCF Ratio: 0.0. The company has no debt, giving it great flexibility and protecting it from financial pressure. This leads to a nearly perfect financial health rating of 9 in its fundamental report.
- Profit Quality (5y avg): 99.01%. On average over the past five years, CorVel has turned almost all of its net income into free cash flow. This shows high-nature earnings that do not depend on accounting changes and supplies the means for strategic projects or shareholder returns.
Price and Fundamental Overview
While the Caviar Cruise method does not directly filter on price, it recognizes that price is important. CorVel currently sells at a high level, with a P/E ratio near 34.4. The fundamental report calls this price "expensive" compared to the wider market, giving a low price rating of 2. However, it also states that the company's "superior profitability rating may support a higher PE ratio."
A summary of the full fundamental analysis report shows a clear view:
- Profitability: Superior (Rating 9/10). Better margins and industry-leading returns on capital.
- Financial Health: Superior (Rating 9/10). No debt and solid liquidity measures.
- Growth: Satisfactory (Rating 4/10). Solid historical increase in revenue and EPS, though future analyst projections are not present.
- Price: Expensive (Rating 2/10). The stock sells at a high multiple, mirroring its high-quality features.
Is CorVel a Quality Investment Prospect?
Based on the quantitative filters of the Caviar Cruise screen, CorVel Corp. shows a strong profile for quality investors. It shows a record of profitable increase, works with superior capital use, and has a very strong balance sheet with excellent cash flow conversion. These are exactly the characteristics that describe a business made to last and build value over the long term.
The main point for an investor is the current price. The high price requires belief in the company's ability to keep its high increase rates and outstanding profitability well into the future. For those who trust the lasting nature of its business model and competitive place within the specialized claims management field, CorVel stands for the kind of financially sound, well-run firm that quality investing aims to find.
Interested in finding other companies that meet the Caviar Cruise quality screen? You can review the full list and change the standards using the Caviar Cruise stock screener.
Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer to buy or sell any security. Investing has risk, including the possible loss of principal. You should do your own research and talk with a qualified financial advisor before making any investment choices.
