Janus International Group Inc. (NYSE:JBI) Passes the "Caviar Cruise" Quality Investing Screen

For investors looking to assemble a portfolio of lasting, high-standard businesses, the quality investing method gives a structured system. This approach centers on finding companies with durable competitive positions, reliable earnings, sound financial condition, and the capacity to produce high returns on capital. The "Caviar Cruise" stock screen puts this thinking into practice by selecting for firms with a record of solid revenue and profit expansion, outstanding returns on invested capital, reasonable debt, and high-grade earnings. The aim is not to locate temporary discounts, but to discover businesses deserving of long-term holding. One company that results from this strict screening process is Janus International Group Inc (NYSE:JBI).

Meeting the Core Quality Standards

Janus International, a top supplier of complete self-storage and commercial building solutions, displays a number of important traits that match the quality investing screen. The given metrics illustrate how the company measures up to the Caviar Cruise filters.

• High Return on Invested Capital (ROIC): A fundamental part of quality investing, a high ROIC shows a company's effectiveness at creating profits from its capital. Janus reports a solid ROIC (leaving out cash, goodwill, and intangibles) of 33.07%, which is well above the screen's 15% minimum. This points to the company having a lasting competitive edge, probably from its combined design, production, and service system, that lets it achieve notable returns.

• Solid Profit Expansion & Quality: The screen requires a 5-year EBIT (earnings before interest and taxes) expansion above 5%. Janus has achieved an EBIT CAGR of 12.84% over this time, showing good growth of its core operational earnings. More notably, its average 5-year Profit Quality, which gauges how much net income becomes free cash flow, is 140.07%, much higher than the 75% requirement. This high number means the company is not just profitable in reporting but is also producing significant extra cash, a sign of a financially sound business.

• Careful Financial Management: Quality companies steer clear of too much borrowing. The Debt-to-Free Cash Flow ratio shows how many years of current cash flow would be required to repay all debt. Janus's ratio of 3.92 sits well under the screen's maximum of 5, indicating that its debt is acceptable compared to its good cash production. This financial care offers stability and options.

A Look at the Wider Fundamental View

While the screen points out specific advantages, a wider view of the company's fundamentals gives background. Based on ChartMill's detailed fundamental report, Janus International gets a total rating of 4 out of 10. This score shows a varied situation when measured against others in the Building Products industry.

• Valuation seems fair. The report states that Janus trades at a Price/Earnings ratio of 13.09, which is seen as a fair valuation and is less expensive than most of its industry peers and the wider S&P 500.
• Financial condition is middling. The company has very good liquidity ratios, with a Current Ratio of 3.03, but holds a higher debt-to-equity ratio than many industry rivals.
• Expansion is a difficulty. The most significant area of note is recent expansion. The report mentions a major drop in both Revenue (-10.84%) and Earnings Per Share (-29.87%) over the last year, with analysts expecting only small revenue expansion soon. This differs from the solid 5-year historical expansion rates found by the screen.

Is Janus International a Quality Stock?

The Caviar Cruise screen effectively finds Janus International Group's core strengths: a very high return on capital, superior cash conversion, and a firm balance sheet when judged against cash flow. These are the foundation traits quality investors want. The company's combined business model in the necessary self-storage sector indicates a level of endurance and pricing ability.

However, the screen is a beginning, not a conclusion. The present slowdown in expansion, as noted in the full fundamental analysis, needs thoughtful study. A quality investor must judge if this is a short-term cyclical drop or a signal of a more lasting change. The company's capability to manage this time and get back to its historical expansion path will be important for its long-term investment case.

For investors wanting to use this quality-centered method, you can review the present Caviar Cruise screen results and settings for yourself here.

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Disclaimer: This article is for information only and does not make up financial guidance, a suggestion, or an offer to buy or sell any security. Investing carries risk, including the possible loss of principal. You should do your own research and talk with a qualified financial advisor before making any investment choices.