Installed Building Products (NYSE:IBP) Emerges as a Quality Investing Candidate

Last update: Dec 5, 2025

For investors looking to assemble a group of lasting, high-achieving companies, the quality investing method presents a useful framework. This process centers on finding businesses with durable competitive strengths, sound financial condition, and a demonstrated history of producing high returns on capital over extended time. Instead of searching for the lowest prices, quality investors accept paying a reasonable price for outstanding businesses they can hold for many years. An organized method to start this process is with a stock screener, like the "Caviar Cruise" screen, which selects for measurable signs of quality such as steady revenue and profit increase, high returns on invested capital, and solid free cash flow production.

One firm that recently appeared from this screening is Installed Building Products (NYSE:IBP), a top installer of insulation and related building products. A detailed look at its financial picture shows a number of traits that match the central ideas of quality investing.

Matching the Central Financial Standards

The Caviar Cruise screen uses several strict filters to find companies with sound and productive business operations. Installed Building Products shows ability across these important measures:

High Return on Invested Capital (ROIC): A fundamental part of quality investing, ROIC calculates how productively a company creates profits from its capital. IBP performs very well here, with a Return on Invested Capital (leaving out cash, goodwill, and intangibles) near 43.5%. This high number shows the company uses its capital with notable success, a mark of a lasting competitive edge and able management, exactly what quality investors look for.
Solid Profit Increase Surpassing Revenue Increase: The screen demands a five-year earnings before interest and taxes (EBIT) growth rate over 5%, and ideally greater than revenue growth. IBP’s EBIT has increased at a compound annual rate of 25.9% over the last five years. This rate exceeding top-line growth points to better operational productivity and pricing ability, as the company turns more of each sales dollar into profit.
Sound Debt Picture and Cash Flow: Financial strength is essential. The screen employs a Debt-to-Free Cash Flow (FCF) ratio below 5 to confirm debts are not excessive. IBP’s ratio of 2.9 fits comfortably within this boundary, indicating it could pay off all its debt with under three years of present free cash flow. This offers a good margin of safety.
High-Grade Earnings: The "Profit Quality" measure contrasts free cash flow with net income. A five-year average above 75% shows earnings are becoming real, usable cash. IBP’s average of 110.6% is very good, meaning it produces more cash than its reported profits indicate. This high-grade cash flow allows options for reinvesting, lowering debt, or rewarding shareholders.

A View of Basic Financial Soundness

A wider look at IBP’s basic financials backs the view taken from the screen. Based on a detailed fundamental analysis, the company receives a good total rating, with special ability in profitability and financial condition.

Profitability Leader: IBP’s ratings for return on equity (37.7%), return on assets (12.5%), and operating margin (12.7%) all place in the highest group of its Household Durables industry group. Also, all three main margins—gross, operating, and profit—have displayed steady increase in recent years.
Sound Financial Condition: The company shows strong liquidity, with a quick ratio of 2.28, and a safe Altman-Z score far from trouble. While it has a fair amount of debt, the earlier noted strong free cash flow production makes this debt level seem very workable.
Valuation Point: The main point of care in the analysis connects to valuation. IBP’s present Price-to-Earnings ratio is seen as high compared to its industry, although it is closer to the wider S&P 500. For quality investors, this highlights the idea that while quality commands a price, it is important to judge if the present market price offers a sensible point of entry for a long-term holding.

Why This Is Important for Quality Investors

The combination of these elements forms a view of a capable company in a necessary part of the construction industry. Its high ROIC and increasing margins suggest it maintains a competitive standing that allows for productive expansion. The excellent translation of profits into free cash flow and a careful debt-to-cash-flow ratio supply the financial strength to manage economic changes and fund future growth. These are the precise features—economic advantages, financial strength, and capital productivity—that quality investing methods try to find for long-term portfolio building.

The Caviar Cruise screen is made to find companies with these basic strengths. Installed Building Products is a present example of its findings, showing how numerical filters can find possible choices for more detailed, non-numerical study. Investors wanting to examine other firms that meet this quality-centered screen can view the current results here.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any security. The information presented is based on data provided and should not be the sole basis for an investment decision. Investors should conduct their own thorough research and consider their individual financial circumstances before making any investment.