FERGUSON ENTERPRISES INC (NYSE:FERG) Excels as a Quality Investment on Key Metrics

The Caviar Cruise stock screening method provides a structured way to find good investment options. This approach, based on the work of Belgian author Luc Kroeze concerning quality investing, concentrates on companies showing steady growth, high profitability, and sound finances. The screen assesses firms using several number-based measures, covering sales and operating profit growth, return on capital, debt handling, and earnings quality, with the goal of finding businesses suitable for long-term holding.

Financial Performance and Growth

Ferguson Enterprises Inc (NYSE:FERG) shows notable growth traits that fit with quality investing ideas. The company has reached a strong EBIT compound annual growth rate of 14.38% over the last five years, clearly going beyond the screen's lowest standard of 5%. This solid operational profit growth shows the company's capacity to grow its main business effectively and steadily.

The company's growth numbers show:

• EBIT growth notably faster than the screen's 5% limit
• Steady operational growth over several years
• Good momentum in main business operations

This maintained EBIT growth is especially significant for quality investors as it shows the company's operational effectiveness and pricing strength, indicating the business can produce rising profits without matching rises in sales.

Profitability and Capital Efficiency

Ferguson performs well in profitability measures, with a Return on Invested Capital excluding cash, goodwill, and intangibles (ROICexgc) of 23.03%. This is much higher than the screen's 15% standard and shows outstanding capital use effectiveness.

Main profitability points:

• ROICexgc of 23.03% compared to a 15% minimum standard
• Results much better than industry averages
• Effective use of invested capital to create returns

For quality investors, a high ROIC is important as it shows the company's capacity to create large returns from the capital it uses, indicating competitive strengths and better management skill in using resources.

Financial Health and Cash Flow

The company keeps up sound financial control, shown by its Debt to Free Cash Flow ratio of 2.34 years. This easily fits the screen's standard of under 5 years and indicates the company could, in theory, pay back all its debt in less than two and a half years using its present free cash flow.

Financial steadiness measures:

• Debt/FCF ratio of 2.34, much lower than the 5-year highest limit
• Manageable debt handling methods
• Good cash flow creation compared to debts

This careful debt position is necessary for quality investments because it lowers financial risk and gives room to handle economic slumps while keeping operational steadiness.

Earnings Quality

Ferguson shows high-grade earnings with a five-year average Profit Quality of 82.34%, passing the screen's 75% limit. This number shows the part of net income changed into free cash flow, indicating the dependability and steadiness of reported profits.

Earnings quality review:

• 82.34% profit quality versus a 75% minimum standard
• Good change of accounting profits into cash
• Steady earnings trend

High profit quality is key for quality investors because it makes sure reported earnings become real cash creation, lowering the chance of accounting issues and offering true financial strength.

Fundamental Analysis Overview

According to the detailed fundamental analysis report, Ferguson gets a total rating of 6 out of 10, with especially high marks in profitability (8/10). The company shows very good return numbers, including Return on Assets of 10.47% and Return on Equity of 31.82%, both placed in the top groups of its industry. While the stock price seems fair compared to industry peers, the report points out some small issues about financial health, mainly connected to liquidity ratios.

Investment Considerations

While Ferguson fits several quality investment standards, possible investors should think about the company working in the cyclical building products distribution field. However, its varied product lines, geographical spread across the United States and Canada, and several sales paths give some diversification advantages. The company's focus on professional contractors instead of DIY customers may offer more steady demand flows.

For investors wanting to find other companies that fit the Caviar Cruise quality standards, the full screening results can be found here.

Disclaimer: This analysis is for informational purposes only and does not constitute investment advice, recommendation, or endorsement of any security. Investors should conduct their own research and consult with financial advisors before making investment decisions. Past performance does not guarantee future results.