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CSW Industrials Inc (NYSE:CSW) Excels as a Quality Investment with High ROIC, Strong EBIT Growth, and Debt-Free Balance Sheet

By Mill Chart

Last update: Aug 16, 2025

Quality investing seeks out companies with solid financial foundations, lasting competitive edges, and steady growth—traits that help them endure over time. The Caviar Cruise stock screening approach, based on Luc Kroeze’s ideas, selects businesses with impressive revenue and profit growth, strong returns on invested capital, low debt, and reliable cash flow conversion. These factors guide investors toward firms likely to grow in value over the long run, not just those temporarily priced low.

CSW Industrials Inc (NYSE:CSW) stands out as a strong fit within this strategy. The company works in contractor solutions, specialized reliability products, and engineered building systems, displaying traits that match quality investing standards.

CSW Industrials Inc

Key Quality Metrics Where CSW Industrials Performs Well

  • High Return on Invested Capital (ROICexgc):
    CSW’s ROIC, excluding cash, goodwill, and intangibles, is 35.67%, far exceeding the Caviar Cruise target of 15%. This shows effective use of capital, a sign of a well-run business. The metric matters because it tracks how well a company earns profits from its main activities, ignoring non-core assets.

  • EBIT Growth Surpassing Revenue:
    While 5-year revenue growth figures are missing, CSW’s EBIT has increased at a 22.25% CAGR over the same span. The Caviar Cruise method prioritizes EBIT growth over revenue, as it points to better operational efficiency and pricing strength—qualities that hint at scalability and market position.

  • Outstanding Profit Quality:
    The firm’s 5-year average profit quality (free cash flow/net income) is 118.4%, beating the screen’s 75% minimum. This means CSW turns accounting profits into actual cash more effectively than most rivals, relying less on non-cash adjustments and strengthening financial stability.

  • No Debt Pressure:
    CSW has no debt, giving it a Debt/FCF ratio of 0. The Caviar Cruise screen prefers companies with ratios under 5, as less debt lowers financial risk and boosts adaptability during downturns.

Additional Strengths Beyond the Screen

CSW’s fundamental analysis report reveals more positives:

  • Profitability: Margins lead the industry, with gross, operating, and net margins at 44.8%, 20.8%, and 15.6%, respectively—each topping over 80% of building products peers.
  • Growth: Historical EPS growth (21.5% CAGR) and projected revenue growth (11.4% yearly) indicate continued progress.
  • Financial Health: A current ratio of 4.03 and Altman-Z score of 10.91 show little concern for liquidity or solvency.

Valuation Notes

CSW trades at a higher valuation (P/E of 29.2, above the industry average), but quality investors often pay more for businesses with lasting advantages. The company’s growth and profitability might support the premium, though deeper analysis is needed.

Find Other Quality Picks

For those looking for similar firms, the complete Caviar Cruise screen results can offer more options.

Disclaimer: This article is not investment advice. Conduct your own research or consult a financial advisor before making decisions.