HIREQUEST INC (NASDAQ:HQI) Stands Out as a High-Quality Stock in the Caviar Cruise Screen

The Caviar Cruise stock screen helps find high-quality companies ideal for long-term investment, based on the ideas of quality investing. This method focuses on businesses with solid revenue and profit growth, strong returns on invested capital, efficient cash conversion, and reasonable debt levels. The screen selects firms that show steady operational strength, pricing ability, and lasting competitive edges, traits that match the buy-and-hold strategy of quality investors.

HireQuest Inc (NASDAQ:HQI) appears as a candidate from this screen, meeting many important criteria that make it worth examining for investors looking for stable businesses.

Key Strengths Matching the Caviar Cruise Screen

• EBIT Growth Faster Than Revenue
  The company’s EBIT has grown at a 5-year rate of 30.2%, much higher than its revenue growth of 2.03%. This points to better operational efficiency and pricing ability, a sign of quality businesses. The Caviar Cruise screen favors firms where profit growth exceeds sales growth, as it shows scalability and good cost control.

• High Return on Invested Capital (ROIC)
  HireQuest’s ROIC (excluding cash, goodwill, and intangibles) is 19.4%, above the screen’s 15% minimum. ROIC shows how well a company generates profits from its capital investments, and a high figure suggests competitive edges and smart capital use, both key for long-term growth.

• Strong Debt Management
  The company’s debt-to-free-cash-flow ratio is just 0.38, meaning it could pay off all its debt in under five months using current cash flow. This financial stability lowers risk and allows for reinvestment or shareholder returns, fitting the screen’s preference for financially sound businesses.

• Excellent Profit Quality
  HireQuest’s 5-year average profit quality, measured as free cash flow compared to net income, is 180.6%, far above the 75% benchmark. This shows the company turns accounting profits into real cash very well, a sign of reliable earnings and financial health.

Fundamental Analysis Summary

According to ChartMill’s fundamental report, HireQuest has a 6/10 rating, showing a mixed but encouraging profile. Key points include:

• Profitability: Strong operating margins (29.07%, beating 93.9% of peers) and solid ROIC, though recent drops in ROIC need watching.
• Valuation: The stock seems fairly priced, with a P/E of 14.38, below industry and S&P 500 averages.
• Growth: While past revenue growth has been uneven, analysts expect modest future growth in earnings and sales.
• Financial Health: Good liquidity (current ratio of 2.18) and low debt support its stability.

Points to Consider

Despite its strengths, HireQuest’s dividend payout ratio (98.45% of income) is not sustainable long-term, and its recent revenue drop (-7.66% YoY) raises concerns about short-term demand. Investors should evaluate whether these are temporary issues or deeper problems.

Finding More Quality Stocks

For investors looking for similar high-quality stocks, the Caviar Cruise screen provides a list of companies meeting strict quality standards.

Disclaimer: This article is not investment advice. Do your own research or consult a financial advisor before making investment decisions.