For investors looking to assemble a group of lasting, high-achieving companies, the quality investing philosophy offers a useful framework. This method centers on finding businesses with durable competitive strengths, sound financial condition, and the capacity to produce high returns on capital over many years. The "Caviar Cruise" stock screen, based on this method, uses a set of strict quantitative tests to find such companies. It searches for firms with steady revenue and profit increases, high returns on invested capital, strong cash flow production, and a solid balance sheet. The aim is not to locate temporary discounts, but to discover businesses fit to become lasting parts of a portfolio.
One company that now meets this strict screening process is EXPEDITORS INTL WASH INC (NYSE:EXPD). As a worldwide logistics provider, Expeditors manages the movement of freight by air and sea, providing customs brokerage, warehousing, and specific supply chain services. Its recent presence on the Caviar Cruise screen indicates its financial characteristics match the principles of quality investing closely.
Matching the Central Quality Standards
The Caviar Cruise screen rests on basic pillars that describe a quality business. Expeditors International shows strength in many of these important measures:
- Profitability and Capital Efficiency: A central part of quality investing is a high return on invested capital (ROIC), which shows how well a company produces profits from its capital. Expeditors performs well here, with an ROIC (excluding cash, goodwill, and intangibles) of 53.28%. This high number shows the company needs fairly little capital to create significant earnings, a sign of an asset-light, expandable business model with a lasting competitive edge.
- Financial Stability and Cash Flow: Quality companies are marked by financial soundness and high-grade earnings. Expeditors has a clean balance sheet with zero debt, leading to a Debt-to-Free Cash Flow ratio of 0.0. This great financial freedom lets the company endure economic slowdowns, fund expansion, and give capital to shareholders without the weight of interest payments. Also, its average Profit Quality over the last five years is 103.12%, meaning its free cash flow has been greater than its reported net income. This shows that the company’s profits are turning into actual, usable cash—a key sign of earnings quality often absent in firms needing more capital.
- Past Growth Path: The screen requires a record of growth, seeking a 5-year compound annual growth rate (CAGR) in EBIT (earnings before interest and taxes) over 5%. Expeditors’ EBIT has increased at a 6.31% CAGR over this time. It is important that this EBIT growth has been faster than its revenue growth (3.37% CAGR), which is a particular test in the Caviar Cruise method. This difference indicates the company has been able to better its operational efficiency and profitability over time, probably through economies of scale, pricing ability, or cost control—all features of a well-managed quality business.
A View of Fundamental Condition
A look at Expeditors’ wider fundamental analysis report supports the image shown by the screen-specific measures. The company gets a good overall fundamental rating of 7 out of 10. Its notable areas are in Profitability and Financial Health, where it scores 8 and 9 out of 10, in that order.
- Profitability Soundness: The company regularly creates high returns, with a Return on Equity of 37.08% and an Operating Margin of 9.87%, each beating most of its competitors in the Air Freight & Logistics industry.
- Outstanding Financial Health: The report confirms the company’s lack of debt and points out its strong solvency, shown by a solid Altman-Z score. It also mentions a history of reducing share count, a use of its plentiful cash flow that benefits shareholders.
- Valuation and Growth Points: The valuation rating is neutral at 5 out of 10. While its Price-to-Earnings ratio is above the industry average, it matches the wider S&P 500, suggesting the market acknowledges its quality traits. The growth rating is a moderate 4, reflecting analyst forecasts for calm, single-digit growth in revenue and earnings in the near future—a typical trait of established, high-quality companies.
For a detailed look at these measures, you can see the full fundamental analysis report for EXPD.
Is Expeditors a "Buy-and-Hold" Possibility?
For the quality investor, the attraction of Expeditors International is in the mix of its competitive place in global logistics, its asset-light and cash-producing model, and its very strong balance sheet. The Caviar Cruise screen finds companies that are not only profitable, but are made to maintain that profitability through economic changes. Expeditors’ absence of debt takes away a big risk, and its high ROIC and cash conversion show efficient management and a durable advantage.
While its short-term growth prospects may be modest, the quality investing philosophy is not mainly about fast growth and more about reliable, lasting compounding of capital at high return rates. The company’s steady operational results and financial responsibility fit this long-term perspective.
Finding More Quality Options
Expeditors International of Washington is one instance of a company that meets a disciplined quality investing screen. Investors wanting to find other companies that match similar strict standards for profitability, financial condition, and growth can run the screen themselves. You can locate the current Caviar Cruise screen and its outcomes here.
Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer or request to buy or sell any securities. The information provided should not be the only basis for any investment choice. Investors should do their own research and talk with a qualified financial advisor before making any investment decisions.
