HIREQUEST INC (NASDAQ:HQI) – A Quality Stock with Strong Financial Health

HIREQUEST INC (NASDAQ:HQI) was identified through our Caviar Cruise screen, which focuses on high-quality companies with strong fundamentals. HQI operates in the staffing services industry, providing solutions across construction, healthcare, and other sectors. The company stands out for its solid financial health, profitability, and efficient capital management. Below, we examine why HQI fits the criteria for quality investors.

Key Strengths

• High Return on Invested Capital (ROIC): HQI’s ROIC (excluding cash and goodwill) is 19.4%, well above our 15% threshold. This indicates efficient use of capital to generate profits.
• Low Debt Burden: The company’s debt-to-free-cash-flow ratio is just 0.38, meaning it could pay off all debt in less than half a year using current cash flow.
• Strong Profit Quality: HQI converts net income into free cash flow at an impressive rate, with a five-year average profit quality of 180.6%, far exceeding the 75% benchmark.
• EBIT Growth Outpaces Revenue: Over the past five years, EBIT growth (30.2% CAGR) has significantly outpaced revenue growth (2.0% CAGR), signaling improving operational efficiency.

Fundamental Analysis Summary

Our fundamental report assigns HQI a rating of 6 out of 10, noting its excellent financial health but some concerns around profitability trends. Key takeaways:

• Profitability: High operating margin (29.1%) and strong past EBIT growth, though recent revenue and earnings growth have slowed.
• Valuation: Trading at a P/E of 15.25, HQI appears reasonably priced compared to industry peers.
• Dividend: Offers a 2.4% yield, but the payout ratio is high at 98.5%, raising sustainability questions.

For investors seeking financially stable companies with efficient capital allocation, HQI presents a compelling case.

Our Caviar Cruise screener lists more quality stocks meeting these criteria.

Disclaimer

This is not investing advice. Always conduct your own research before making investment decisions.