Brinker International Inc (NYSE:EAT) Embodies Caviar Cruise Quality Investing Principles

The Caviar Cruise stock screening method is a structured process for quality investing, focusing on companies with lasting competitive strengths, sound financial condition, and steady growth. This approach highlights fundamental soundness instead of temporary price changes, looking for businesses with strong revenue and profit increases, high returns on capital put to work, acceptable debt amounts, and quality profits that become real cash flow. The method works through both a standard and a more selective screening type, with the standard type finding companies with good basic measures and the selective type using extra filters for profit and growth.

Financial Performance and Growth Measures

BRINKER INTERNATIONAL INC (NYSE:EAT) displays a number of traits that match quality investing ideas, especially via its notable profit generation and effective use of capital. The company's financial measures show a record of operational effectiveness and planned financial handling.

• EBIT Growth (5Y CAGR): 38.16% - Much higher than the 5% minimum level needed by the Caviar Cruise screen
• ROIC Excluding Cash/Goodwill/Intangibles: 29.11% - Much better than the 15% minimum need for quality companies
• Debt to Free Cash Flow: 1.17 - Shows the company might pay back all its debt in about 1.17 years using current free cash flow
• Profit Quality (5Y Average): 123.46% - Much better than the 75% level, showing a strong change of accounting profits to cash

The outstanding EBIT growth shows the company's capacity to increase operational profit at a fast rate, a main point for quality investors who value lasting earnings capacity. This measure is especially important when noting that EBIT growth was faster than revenue growth, pointing to better operational effectiveness and possible pricing strength rather than growth reached only through more revenue.

Capital Effectiveness and Financial Condition

The return on invested capital leaving out cash, goodwill, and intangibles is 29.11%, putting Brinker International with the best performers in capital effectiveness. This measure is important for quality investors as it shows how well management uses capital in the company's main operations. A high ROIC points to lasting competitive strengths and operational effectiveness, both signs of quality businesses good for long-term investment.

The company's debt handling looks very careful, with a debt-to-free cash flow ratio of 1.17 years. This ratio, which shows how fast a company could pay off all debt using current free cash flow, is much better than the Caviar Cruise screen's need of less than five years. For quality investors, this shows financial steadiness and less chance of financial trouble, letting the company handle economic drops while still putting money into growth chances.

Earnings Quality and Cash Flow Soundness

Brinker International's profit quality measure of 123.46% over five years is much better than the screen's 75% level, showing the company turns accounting profits into real cash flow at a high rate. This trait is key for quality investors because it shows the lasting nature of reported earnings and lowers dependence on accounting changes or non-cash items. The company's ability to make cash well over reported net income suggests strong operational control and effective working capital methods.

Full Fundamental Review

According to the detailed fundamental analysis report, Brinker International gets a total rating of 7 out of 10, with especially good results in profit generation (8/10) and condition (7/10). The company shows outstanding returns on assets (16.38%), equity (129.14%), and invested capital (25.71%), doing better than most others in the industry. Valuation measures look good with a P/E ratio of 10.71 and forward P/E of 8.84, both lower than industry and S&P 500 averages. While the company shows some points to watch in liquidity ratios, these are balanced by very good solvency and profit generation measures that suggest the current ratio may not completely show the company's financial soundness given its specific way of operating.

Investment Points

For quality investors using the Caviar Cruise method, Brinker International offers several positive qualities. The company's high ROIC and strong profit quality point to lasting competitive strengths in the competitive restaurant field. The fast EBIT growth together with acceptable debt levels shows a business able to pay for future growth from its own resources while keeping financial steadiness. The valuation measures suggest the company could be fairly valued compared to its financial soundness and growth outlook.

While the company works in the competitive restaurant field, its shown pricing strength, better margins, and effective capital use suggest it has qualities that quality investors look for. The company's international presence through its Chili's and Maggiano's brands gives geographic spread, though investors should think about industry-specific risks including consumer spending habits and changes in commodity prices.

For investors wanting to find more companies that fit the Caviar Cruise quality investing rules, more screening results can be found using the Caviar Cruise stock screener.

Disclaimer: This review is for information only and is not investment advice, a suggestion, or support for any security. Investors should do their own research and talk with financial advisors before making investment choices. Past results do not ensure future outcomes.