FirstService Corp (NASDAQ:FSV) Excels as a Caviar Cruise Quality Investment

FirstService Corp (NASDAQ:FSV) has become a notable option for quality investors using the Caviar Cruise screening method. This investment process focuses on finding companies with excellent business traits, those showing steady revenue and profit increases, high returns on invested capital, acceptable debt levels, and good cash flow generation. The process highlights lasting competitive strengths and high operational standards instead of short-term market fluctuations, making it especially fitting for long-term investors looking for companies with lasting business structures.

Financial Performance and Growth Measurements

The Caviar Cruise method gives considerable importance to historical growth trends, demanding at least 5% yearly growth in both revenue and EBIT over a five-year span. FirstService shows outstanding results in this part, especially in profit increases. While the company's five-year revenue growth information is not present in the screening results, its EBIT growth of 16.98% per year greatly surpasses the 5% minimum. This points to good operational effectiveness and possible pricing strength within its property services divisions.

Important performance measurements include:

• EBIT growth (5Y CAGR): 16.98% compared to required 5%
• Revenue growth projections: Analysts forecast 6.25% yearly growth over the next few years
• Profit Quality (5y average): 141.74% is much higher than the 75% standard

The very good profit quality measurement, which calculates free cash flow conversion compared to net income, indicates FirstService effectively turns accounting profits into real cash. This offers financial room for strategic investments, debt repayment, or shareholder returns without affecting operational requirements.

Profitability and Capital Use

Return on invested capital is a central measurement in quality investing, showing how well a company produces returns from its capital foundation. FirstService's ROIC without cash, goodwill and intangibles is at 23.97%, greatly exceeding the 15% minimum required by the Caviar Cruise screen. This points to excellent capital allocation and operational effectiveness within the competitive real estate services field.

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

• Operating Margin: 6.43%, performing better than 65.63% of industry companies
• Profit Margin: 2.53%, higher than 64.06% of rivals
• Consistent margin patterns despite economic changes

Financial Condition and Debt Handling

Quality investing emphasizes financial soundness, with the Caviar Cruise method specifically looking at debt compared to free cash flow production. FirstService's Debt-to-FCF ratio of 4.18 years is inside the acceptable span of 0-5 years, indicating the company could in theory pay back all its debt in slightly more than four years using current cash flow levels. This careful debt position offers stability during economic declines while keeping strategic options.

Other financial condition indicators:

• Altman-Z score of 3.15 suggests low bankruptcy danger
• Current ratio of 1.76 shows adequate short-term liquidity
• Debt/Equity ratio of 0.89 indicates moderate leverage

Fundamental Analysis Summary

According to the detailed fundamental analysis report, FirstService gets an overall score of 6 out of 10 compared to industry companies. The company shows specific ability in profitability measurements, with ROIC, ROA, and ROE all placed in the top group of the real estate management and development industry. While valuation seems fair relative to industry norms, the report mentions some issues regarding financial condition, especially about share dilution patterns. Growth outlooks remain good with estimated EPS growth of 11.38% per year, though revenue growth forecasts have slowed compared to past results.

Investment Points

Beyond the numerical screening requirements, quality investors should think about several non-numerical aspects that make FirstService appealing. The company's varied service offerings across residential and commercial property management gives revenue steadiness. Its franchise system for specialized services builds expandable growth chances while keeping brand uniformity. The necessary nature of many services provided, especially in property upkeep and restoration, offers recession-resistant attributes that match well with quality investing ideas.

For investors wanting to find more companies that satisfy the Caviar Cruise quality requirements, the full screening results offer a beginning for more investigation.

Disclaimer: This analysis is for informational purposes only and should not be considered as investment advice. Investors should conduct their own research and consult with financial advisors before making investment decisions. Past performance does not guarantee future results.