MIDDLEBY CORP (NASDAQ:MIDD) Stands Out as a Quality Investment Pick with Strong ROIC and Profit Metrics

The Caviar Cruise stock screening strategy helps find high-quality companies for long-term investment. Based on quality investing principles, this method looks for firms with steady revenue and profit growth, good returns on invested capital, reasonable debt levels, and the ability to turn earnings into free cash flow. The strategy values lasting competitive strengths, efficient operations, and strong finances, traits that help a business endure over time.

One company that fits these standards is MIDDLEBY CORP (NASDAQ:MIDD), a maker of commercial and residential foodservice equipment. The company’s financials match several Caviar Cruise screening measures, making it a possible pick for quality-focused investors.

Key Quality Metrics for MIDD

• High Return on Invested Capital (ROICexgc: 33.20%)
  A strong ROIC shows Middleby uses capital well to create profits. The Caviar Cruise screen looks for at least 15%, and MIDD’s 33.2% is well above this mark. This points to a lasting competitive edge, likely from its specialized equipment and solid position in foodservice and processing markets.

• Good Debt-to-Free Cash Flow Ratio (3.87)
  The screen selects companies with a Debt/FCF ratio under 5, meaning they can handle debt without overleveraging. MIDD’s 3.87 ratio suggests it could repay its debt in less than four years using current free cash flow, a sign of financial strength.

• Profit Quality (5Y Avg: 130.65%)
  Profit Quality checks how well net income turns into free cash flow. A number above 100%, like MIDD’s, means the company produces more cash than reported earnings, often due to careful accounting or efficient working capital. This fits the Caviar Cruise focus on steady cash generation.

• EBIT Growth Faster Than Revenue Growth
  Over the past five years, MIDD’s EBIT grew at a 6.38% yearly rate, while revenue grew at 2.95%. This gap signals better operational efficiency, a key trait of quality businesses. The screen favors companies where profits rise faster than sales, showing pricing power or cost control.

Fundamental Analysis Summary

Middleby’s fundamental report shows a mixed but mostly strong profile:

• Profitability: Solid margins (Operating Margin: 18.44%, better than 85.94% of peers) but a below-average ROIC (8.26%) when including goodwill and intangibles.
• Valuation: Appealing P/E (12.27) and P/FCF ratios, trading lower than most competitors.
• Growth: Moderate past EPS growth (6.89% 5Y yearly rate) with expected improvement (9.08% forward EPS growth).

While revenue growth has been slow, MIDD’s ability to boost profits and generate cash supports the quality investing case.

Why These Metrics Are Important

The Caviar Cruise strategy targets companies that can grow value over time. High ROIC and Profit Quality confirm capital is used wisely, while manageable debt and rising EBIT margins lower risk. MIDD’s financials display these qualities, even if its revenue growth isn’t rapid.

For investors searching for similar quality stocks, the Caviar Cruise screen provides a list of candidates meeting these strict standards.

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