ICF International Inc (NASDAQ:ICFI) Stands Out in Caviar Cruise Quality Investing Screen

The Caviar Cruise stock screening strategy is based on quality investing, a method that emphasizes companies with solid fundamentals, lasting competitive edges, and steady growth. While value investing looks for undervalued stocks, quality investing targets businesses with high profitability, smart capital use, and the ability to withstand economic shifts. The Caviar Cruise screen uses strict criteria to find these companies, such as revenue and EBIT growth, strong return on invested capital (ROIC), reasonable debt, and reliable profit quality. These factors help investors identify firms likely to perform well over time, even if their stock prices are higher than average.

ICF International Inc (NASDAQ:ICFI) stands out as a potential pick from this screen, meeting many of the key standards for quality investors. Below, we explore how the company fits the Caviar Cruise approach and why it might be worth a closer look.

Key Quality Metrics in the Caviar Cruise Screen

1. Solid EBIT Growth (5Y CAGR > 5%)
   ICFI’s EBIT has increased at a yearly rate of 10.34% over the past five years, well above the 5% target. This shows the company’s ability to grow its core profits, a sign of well-run businesses with pricing strength or cost advantages. The Caviar Cruise strategy favors EBIT growth over net income to avoid misleading results from financial tactics like share buybacks or tax changes.

2. Strong Return on Invested Capital (ROICexgc > 15%)
   ICFI’s ROIC, excluding cash, goodwill, and intangibles, is 40.42%, much higher than the 15% minimum. ROIC tracks how well a company turns invested capital into profits, and a high ratio points to a lasting edge. This fits the Caviar Cruise goal of backing firms that use capital wisely to grow returns over time.

3. Low Debt (Debt/FCF < 5)
   With a debt-to-free-cash-flow ratio of 4.0, ICFI shows careful borrowing. The screen looks for companies that could pay off all debt in five years using current cash flows, lowering financial risk. This matters to quality investors, who prefer stability over high leverage.

4. High Profit Quality (5Y Avg. > 75%)
   ICFI’s five-year average profit quality—measured as free cash flow compared to net income—is 183.54%, meaning the company turns accounting profits into cash very efficiently. Strong profit quality suggests earnings are not boosted by non-cash adjustments, supporting the reliability of its financial results.

Fundamental Analysis Summary

ICFI’s fundamental report gives it a neutral score of 5/10, showing stable but mixed fundamentals. Key points include:

• Profitability: The company beats peers in operating margin (8.11%) and profit margin (5.45%), though its ROIC lags behind the industry average. Recent gains in margins and ROIC hint at positive trends.
• Financial Health: A good debt-to-FCF ratio (4.0) and reasonable leverage (Debt/Equity of 0.53) point to a balanced financial setup. Liquidity metrics (Current Ratio: 1.34) are decent but not outstanding.
• Valuation: With a P/E of 12.33, ICFI seems priced below its industry and the S&P 500. However, weak growth forecasts (-0.42% EPS drop) limit optimism.

Limitations and Factors to Watch

While ICFI does well in EBIT growth, ROIC, and cash conversion, its revenue growth is slow (2.88% YoY), and analysts expect declines in both revenue and earnings. Quality investors should balance these challenges against the company’s operational strengths. Also, the low dividend yield (0.62%) may not appeal to income seekers, though this is common for firms putting cash back into growth.

Finding More Options

For investors interested in other quality stocks filtered by the Caviar Cruise method, the full screen results can be found here.

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