For investors looking to assemble a collection of durable, high-achieving companies for the future, the ideas of quality investing offer a useful structure. This method centers on finding businesses with lasting competitive strengths, sound financial condition, reliable earnings, and capable leadership, traits that let them increase value over many years. The "Caviar Cruise" stock filter is made to methodically sort for these features, highlighting measurable numbers like high returns on invested capital, solid and improving earnings, strong free cash flow creation, and a careful balance sheet.
One firm that now meets this strict filter is ExlService Holdings Inc (NASDAQ:EXLS). As a supplier of data analytics, digital operations, and business process management, EXLS seems to display several important qualities that quality investors value.
Matching the Main Quality Investing Standards
The Caviar Cruise filter uses a detailed set of rules to separate companies with better business models. EXLS's financial picture shows good agreement with these main needs:
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Outstanding Return on Invested Capital (ROIC): A central part of quality investing, a high ROIC shows a company's skill at producing profits from its capital base productively. The filter demands a ROIC (leaving out cash, goodwill, and intangibles) over 15%. EXLS greatly surpasses this with a present ROICexgc of 40.8%, implying it uses capital with notable success to build shareholder value.
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Solid and Getting Better Profitability: The method looks for companies where profit growth is faster than sales growth, showing pricing ability and operational effectiveness. EXLS shows this with a 5-year EBIT (earnings before interest and taxes) compound annual growth rate (CAGR) of 25.3%. This concentration on EBIT growth, not only net income, helps investors judge the central, repeatable earnings of the business activities.
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High Profit Quality and Financial Soundness: Quality investors favor earnings that are supported by actual cash. The filter sorts for a 5-year average Profit Quality (Free Cash Flow/Net Income) over 75%. EXLS has a notable average of 118.1%, showing it changes more than 100% of its accounting profits into free cash flow. This strong cash creation directly aids the next important rule: a sound balance sheet. The filter needs a Debt-to-Free Cash Flow ratio under 5, meaning the company could pay off all debt in under five years using its present cash flow. EXLS's ratio of 1.24 is very careful, suggesting little financial danger and important strategic room to act.
A Broad Fundamental View
A look at EXLS's wider fundamental analysis report supports the results from the quality filter. The company gets a total fundamental score of 7 out of 10, with special force in two parts key for long-term owners:
- Profitability & Condition: EXLS gets a 9 out of 10 for profitability, led by sector-leading margins and returns on equity and assets. Its condition score is a firm 8, helped by a very good Altman-Z score (showing low bankruptcy risk), strong liquidity ratios, and that already noted low debt level.
- Steady Growth: The company displays a solid history, with sales increasing at a 13.15% CAGR and EPS at a 21.93% CAGR over recent years. Analysts predict this pace to keep going, looking for double-digit growth in both sales and profits over the next few years.
While its price scores a middle 4, the report states that EXLS's price-to-earnings ratios are fair compared to both its sector and the wider S&P 500, mainly when thinking about its high profitability and growth picture.
Is EXLS a Quality Growth Stock?
For an investor using the Caviar Cruise method, EXLS makes a strong argument. It meets the needed number-based checks: outstanding returns on capital, quickening operational profits, excellent cash conversion, and a very strong balance sheet. These are the signs of a business with a possible competitive edge, in this case, probably driven by its data-focused knowledge and established client connections in sectors like insurance, healthcare, and banking.
The non-number aspects suggested in its profile, a global delivery system, focus on high-growth analytics and AI services, and operation in a non-cyclical sector, fit well with the less measurable features quality investors want, such as stable demand and skilled guidance.
The Caviar Cruise filter is a useful beginning step for spotting companies with quality features. You can review the present filter results and change the rules yourself using this Caviar Cruise stock screener.
Disclaimer: This article is for information only and does not make up investment guidance, a suggestion, or an offer to buy or sell any security. The data shown is based on public information and specific filter rules. Investors should do their own complete study and think about their personal money situation before making any investment choices.
