For investors looking to assemble a portfolio of lasting, high-standard businesses, the quality investing method offers a useful framework. This idea, which shaped the "Caviar Cruise" stock screen, centers on finding companies with durable competitive strengths, sound financial condition, and the capacity to produce high returns on capital over time. Instead of searching for steep discounts, quality investors are prepared to pay a reasonable price for outstanding businesses they can own for many years. The screen uses measurable filters to locate firms with a record of earnings growth, high returns on invested capital, good cash flow, and reasonable debt. One company that recently appeared from this systematic search 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, shows many important traits that fit the quality investing approach. The Caviar Cruise screen favors companies that are growing with profits and efficiency. Here is how JBI measures against some of the screen's main filters:
- High Return on Invested Capital (ROIC): A central part of quality investing, a high ROIC shows a company's skill in using capital to create earnings. The screen asks for an ROIC (leaving out cash, goodwill, and intangibles) over 15%. Janus International greatly passes this mark with a solid ROICexgc of 33.07%. This implies the company has clear competitive strengths, probably from its combined design, manufacturing, and service system, that let it earn high returns on money put into its operations.
- Good Profit Quality and Cash Flow: Quality investors value earnings supported by actual cash. The screen seeks a 5-year average Profit Quality (Free Cash Flow/Net Income) above 75%. JBI performs well here with a number of 140.07%, showing it has turned its accounting profits into free cash flow at a high rate. This good cash creation allows for financial options to reinvest, reduce debt, or give capital to shareholders.
- Reasonable Debt Level: Financial strength is essential. The screen employs a Debt-to-Free Cash Flow ratio below 5 to confirm debts can be handled easily from operating cash flows. Janus International's ratio of 3.92 fits within this acceptable zone, meaning it could pay off all its debt with under four years of present free cash flow, indicating a sound balance sheet.
- Profitable Growth Path: The screen requires that growth in Earnings Before Interest and Taxes (EBIT) exceeds sales growth over five years, a signal of better operational efficiency and pricing ability. JBI's 5-year EBIT CAGR of 12.84% meets the growth requirement. While a matching 5-year sales growth number was not in the given data, the steady EBIT increase points to a business that is expanding with profits.
A View of the Fundamental Picture
Outside the specific screen rules, an examination of Janus International's wider fundamental report shows a varied but notable picture. The company has an overall fundamental rating of 5 out of 10, suggesting a middling performance compared to others in its building products field.
- Profitability & Health: The company gets a 6 for profitability, helped by a good gross margin (better than 74% of the field) and a history of positive earnings and cash flow. Its financial health score is a 5, supported by very good liquidity ratios (Current and Quick Ratios) but affected by a debt-to-equity ratio that is above many field rivals.
- Valuation & Growth: The most notable parts are valuation and growth. JBI scores a 7 on valuation, looking distinctly inexpensive compared to both its field and the wider S&P 500 on measures like Price/Earnings and Price/Free Cash Flow. In contrast, it scores a low 3 on growth, showing a marked deceleration in sales and earnings over the last year, though its longer-term history stays acceptable.
You can examine the full specifics of this analysis through the full Janus International fundamental report.
Is JBI a Quality Investment Prospect?
For an investor using the Caviar Cruise method, Janus International offers an interesting case. It meets several vital checks for a quality business: high returns on capital, excellent translation of profits into cash, and a reasonable debt situation, all signs of a company with a lasting competitive edge. Its present valuation looks modest, possibly providing a buffer.
However, the recent growth deceleration and higher debt compared to similar companies are items for more investigation. A quality investor would need to judge if the recent softness is temporary or shows a more significant issue for the business. The central question stays: is this a short-term difficulty for a basically sound company, or a signal of fading strengths?
The Caviar Cruise screen is made to find interesting prospects for more study, not to give direct buy recommendations. Janus International’s presence on this screen makes it deserving of that additional examination.
Find other companies that satisfy the strict Caviar Cruise quality screen by viewing the full screen results here.
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Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. The information presented is based on data provided and should not be the sole basis for any investment decision. Investing involves risk, including the potential loss of principal. Always conduct your own research and consider consulting with a qualified financial advisor before making any investment decisions.
