For investors aiming to assemble a portfolio of lasting, superior businesses, the ideas of quality investing offer a useful structure. This method centers on finding companies with lasting competitive strengths, reliable and profitable expansion, sound financial condition, and skilled leadership, the sort of operations one can securely hold for decades. The "Caviar Cruise" stock screen puts this thinking into practice by selecting for particular, measurable numbers that indicate corporate strength. A company that meets this strict screen is FactSet Research Systems Inc (NYSE:FDS).
A Picture of Reliability and Market Leadership
FactSet supplies a vital digital platform and enterprise services that supply financial data, analytics, and technology to the worldwide investment sector. Its operation is founded on entrenched client connections, repeatable subscription income, and significant client retention barriers, forming a steady and forecastable financial picture. The company’s place as a necessary instrument for finance experts matches a central idea of quality investing: functioning in a business that is clear and backed by persistent, fundamental demand drivers.
How FactSet Fulfills the Caviar Cruise Standards
The Caviar Cruise screen uses multiple filters to find quality. FactSet’s fundamental data shows it meets these requirements decisively, displaying the traits quality investors value.
- Profitable Expansion: The screen requires both revenue and EBIT (earnings before interest and taxes) to have increased by a minimum of 5% each year over the last five years. FactSet surpasses this easily, with a 5.26% revenue CAGR and a stronger 11.22% EBIT CAGR. Importantly, EBIT expansion exceeding revenue growth, as seen here, points to better operational effectiveness and pricing strength, signs of a quality operation.
- Excellent Capital Use: Maybe the most important number for quality investors is Return on Invested Capital (ROIC), which calculates how well a company produces profits from its capital. The screen asks for an ROIC (leaving out cash, goodwill, and intangibles) over 15%. FactSet’s result of 213.49% is very high, showing a operation with little physical assets, high scalability that creates very large returns on each dollar invested. This is a strong sign of a lasting competitive edge.
- Financial Strength and Earnings Soundness: The screen checks financial health by requiring that a company's total debt could be settled with its free cash flow in under five years. FactSet’s Debt-to-Free Cash Flow ratio of 2.11 years shows a solid balance sheet and limited financial danger. Also, the "Profit Quality" filter looks for companies that turn accounting profits into actual cash. FactSet’s five-year average of 117.82% means it creates more free cash flow than its stated net income, a signal of very sound, lasting earnings.
Fundamental Condition in Detail
A wider look at FactSet’s finances supports the image shown by the screen. The company’s fundamental analysis report gives it a firm score of 7 out of 10, with notable scores in profitability and financial health. Main points include:
- Exceptional Profitability: FactSet’s Return on Equity (27.66%) and Return on Assets (14.21%) are in the top 7% of its Capital Markets industry group.
- Strong Financial Health: The company’s Altman-Z score shows no bankruptcy danger, and its ability to meet obligations is with the best in the field.
- Fair Price: While not a bargain, FactSet trades at a Price-to-Earnings ratio (16.76) under the wider S&P 500 average, which may be reasonable given its sound, stable nature and dependable growth.
You can review the complete, itemized look at FactSet’s fundamentals in its detailed analysis report.
The Less Tangible Strength
While the number-based filters mark FactSet as a candidate, quality investing also weighs less measurable elements. The company runs a worldwide platform serving a professional client base, which offers geographic spread and protection from regional economic shifts. Its services are firmly built into client processes, creating high client retention barriers. Leadership has shown careful stewardship through steady share buybacks and a dividend that has increased for more than ten years. These non-quantitative features support the solid figures, indicating a business made for the long term.
Conclusion
For investors using a quality-oriented, long-term holding strategy, FactSet Research Systems presents a strong example. It successfully meets a multi-factor screen made to find companies with profitable expansion, outstanding returns on capital, and very firm financials. Its business model, supplying essential data and analytics to the finance industry, is stable, repeatable, and hard to challenge. While the present market situation shows a good near-term direction for the S&P 500, quality investing is not mainly about market timing and more about holding the right companies through periods of change. FactSet seems to be exactly that sort of company.
Find other companies that satisfy the strict Caviar Cruise standards by viewing the complete screen results here.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation to buy or sell any security, or an endorsement of any investment strategy. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.
