James Hardie Industries PLC (NYSE:JHX) Stands Out as a High-Quality Stock in the Caviar Cruise Screen

The Caviar Cruise stock screen is designed to find high-quality companies suitable for long-term investment, using principles of quality investing. This method focuses on firms with steady revenue and profit growth, high returns on invested capital, reasonable debt levels, and consistent cash flow generation. The strategy looks for businesses with lasting competitive advantages, efficient operations, and strong financials, qualities that help them endure over time.

James Hardie Industries PLC (NYSE:JHX) stands out as a strong candidate from this screen, meeting many key criteria that match the Caviar Cruise approach.

Key Strengths of James Hardie Industries PLC

1. Steady Revenue and EBIT Growth

• Revenue Growth (5Y CAGR): 15.32% – Above the screen’s minimum requirement of 5%, this shows strong demand for JHX’s fiber cement and gypsum building products.
• EBIT Growth (5Y CAGR): 12.01% – This reflects increasing profitability, also exceeding the 5% growth target, highlighting operational efficiency.

The fact that EBIT growth is higher than revenue growth points to better margins, a sign of pricing strength and cost savings, both important for investors looking for stable businesses.

2. High Return on Invested Capital (ROIC)

• ROIC (Excluding Cash & Goodwill): 16.30% – Above the 15% benchmark, this shows JHX uses capital effectively to generate profits. A high ROIC indicates a company’s ability to maintain competitive edges and reinvest earnings wisely.

3. Strong Free Cash Flow and Debt Management

• Debt-to-Free Cash Flow: 2.95 – Below the screen’s upper limit of 5, this ratio means JHX can repay its debt in less than three years using current cash flows. Low debt reduces financial risk, a key concern for quality investors.
• Profit Quality (5Y Avg.): 110.03% – This measure, comparing free cash flow to net income, shows JHX turns nearly all its earnings into cash, reflecting financial stability and minimal accounting issues.

4. Profitability and Margin Improvement

• Operating Margin: 22.19% – Much higher than industry peers, showing pricing strength and cost control.
• Gross Margin: 38.81% – Among the best in its sector, confirming JHX’s strong market position.

Fundamental Analysis Overview

A closer look at JHX’s fundamental analysis report reveals more strengths:

• Financial Health: A solid Altman-Z score (4.28) and reasonable debt/equity ratio (0.51) suggest low risk of financial trouble.
• Valuation: While not cheap, JHX trades at a fair P/E (18.6) compared to industry peers and the S&P 500.
• Growth Outlook: Analysts expect 15.48% annual EPS growth and 15.32% revenue growth, signaling continued expansion.

Why JHX Fits the Quality Investing Approach

Quality investors look for companies with lasting competitive edges, steady earnings, and strong finances—all of which JHX demonstrates. Its ability to grow revenue and profits while maintaining high returns on capital aligns with the Caviar Cruise screen’s focus on long-term performers. Its global presence in construction materials also positions it to benefit from urbanization trends, supporting future growth.

For investors searching for similar high-quality stocks, the Caviar Cruise screen provides a selected list of companies that meet these strict criteria.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research or consult a financial advisor before making decisions.