Comfort Systems USA Inc (NYSE:FIX) Passes Caviar Cruise Screen for Quality Investors

Mechanical and electrical contracting services provider Comfort Systems USA Inc (NYSE:FIX) has become a notable option for quality investors after a screen using the Caviar Cruise method. This investment process centers on finding companies with superior business fundamentals, lasting competitive strengths, and sound financial condition that can be owned for long periods. The method uses measurable data that signal high operational performance and financial steadiness, making it a good fit for investors looking for resilient businesses able to endure different economic conditions.

Financial Performance and Growth Data

The Caviar Cruise screen looks for companies with steady revenue and profit increases, setting minimum levels of 5% yearly growth over five years for both measures. Comfort Systems USA greatly surpasses these needs, displaying outstanding operational results. The company's EBIT growth of 35.75% CAGR over the last five years is much higher than the screen's 5% minimum, signaling strong operational effectiveness and possible pricing ability. While the five-year revenue growth data appears as null in the present dataset, the company's more recent revenue growth of 27.71% over the last year and 21.86% average yearly growth point to solid top-line increase.

Key performance measures include:

• EBIT growth (5Y CAGR): 35.75% versus required 5%
• Recent revenue growth: 27.71% year-over-year
• Earnings per share growth: 36.79% average annual growth
• Expected future EPS growth: 24.96% annually

Profitability and Return Measures

Return on invested capital is a fundamental part of the Caviar Cruise method, with the screen demanding a minimum 15% ROIC excluding cash, goodwill, and intangibles. Comfort Systems USA delivers superior performance in this important area, reaching a ROICexgc of 171.28%. This very high return shows the company effectively uses capital to create significant profits, far surpassing the quality investing level and placing it with the best businesses in capital use effectiveness.

The company's margin results further support its quality traits:

• Operating margin: 13.36%, performing better than 89% of industry peers
• Profit margin: 10.06%, higher than 85% of competitors
• Steady margin improvement across gross, operating, and profit margins

Financial Condition and Steadiness

Quality investing focuses on financial durability, especially through the debt-to-free-cash-flow ratio, where the Caviar Cruise screen requires a ratio under 5. Comfort Systems USA shows very good financial condition with a debt/FCF ratio of 0.17, indicating the company could settle all existing debt in about two months using current free cash flow. This careful debt stance offers notable financial room and lowers risk during economic declines.

Additional condition metrics include:

• Altman-Z score of 8.49 signaling very low bankruptcy risk
• Debt-to-equity ratio of 0.06, superior to 87% of industry peers
• Steady positive earnings and cash flow over five years
• Share count decrease through buybacks

Profit Quality and Reinvestment

The screen assesses profit quality by looking at the change of accounting profits into real cash, requiring a five-year average above 75%. Comfort Systems USA performs very well with a profit quality ratio of 139.51%, signaling strong cash creation compared to reported earnings. This high conversion rate implies careful accounting methods and dependable earnings quality, both valued traits for quality investors looking for consistent financial reporting.

Fundamental Analysis Summary

According to the detailed fundamental analysis report, Comfort Systems USA gets an overall rating of 8 out of 10, with especially high scores in profitability (9/10) and financial condition (9/10). The analysis notes the company's very good returns on assets, equity, and invested capital, all placed in the top tenth of the construction and engineering industry. While valuation seems high based on standard measures, the company's very good growth outlook and profitability might support higher multiples.

Industry Standing and Business Model

Comfort Systems USA works through 47 operating units across 136 cities nationwide, delivering mechanical and electrical contracting services to commercial and industrial areas. The company's spread-out geographic presence and service mix add to its durability, while its focus on necessary building systems offers some protection from recessions. The mechanical segment includes HVAC, plumbing, piping, and controls, while the electrical segment covers installation and maintenance of electrical systems, both serving ongoing service and new building markets.

Quality Investment Points

For quality investors, Comfort Systems USA shows several positive traits beyond the numerical data. The company gains from repeating maintenance income, technical knowledge that builds entry obstacles, and a national size that offers competitive benefits in serving big customers. The necessary aspect of its services for commercial and industrial operations provides some buffer from economic changes, while the split nature of the industry offers chances for consolidation.

Finding More Options

Investors curious about finding other companies that meet the Caviar Cruise quality standards can access the complete screen results to review other possible quality investment choices. The screen can be adjusted further based on personal investment choices and risk appetite.

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.