Mueller Industries Inc (NYSE:MLI) Excels as a Caviar Cruise Quality Investment Pick

The Caviar Cruise stock screening strategy is designed to find high-quality companies ideal for long-term investment. Based on quality investing principles, this method looks for firms with solid revenue and profit growth, strong returns on invested capital, low debt, and steady cash flow. The approach highlights businesses that not only have a strong track record but also show lasting competitive edges and efficient operations.

Mueller Industries Inc (NYSE:MLI) stands out as a strong fit within this framework. The company, which produces copper, brass, aluminum, and plastic products, displays many traits that match the Caviar Cruise requirements.

Key Strengths of Mueller Industries for Quality Investors

1. Outstanding Return on Invested Capital (ROIC)

• The company has an ROIC (excluding cash, goodwill, and intangibles) of 44.73%, well above the Caviar Cruise minimum of 15%.
• A high ROIC shows effective capital use, a sign of strong businesses. This measure is important because it reveals how well a company turns investments into profits, which is key for long-term growth.

2. Strong EBIT Growth Faster Than Revenue

• Over the last five years, MLI has achieved an EBIT compound annual growth rate (CAGR) of 32.46%.
• The Caviar Cruise strategy favors companies where EBIT growth outpaces revenue growth, indicating better profitability from scale or pricing strength. MLI’s results here point to operational skill.

3. Low Debt and Healthy Cash Flow

• The company’s debt-to-free cash flow ratio is very low (0.00025), far below the screen’s maximum of 5.
• Minimal debt compared to cash flow ensures financial stability and adaptability, which are crucial during economic challenges. Free cash flow supports reinvestment, dividends, or share buybacks, all of which benefit shareholders.

4. High Profit Quality

• MLI’s five-year average profit quality (free cash flow to net income) is 100.88%, exceeding the 75% target.
• This means almost all reported earnings become actual cash, lowering the risk of accounting issues and confirming profit reliability.

Fundamental Analysis Overview

A closer look at MLI’s financial health through ChartMill’s fundamental report confirms its appeal for quality investors:

• Profitability: The company scores 9/10, with top-tier margins (19.76% operating margin) and returns (23.40% ROE).
• Financial Health: A perfect 10/10, backed by no debt, strong liquidity (current ratio of 4.29), and a solid Altman-Z score of 14.30.
• Valuation: With a P/E of 14.88, MLI seems fairly priced compared to peers and the S&P 500, and its PEG ratio suggests growth is reasonably valued.
• Growth: While past EPS growth has been impressive (42.60% CAGR), future estimates are more modest (~7.66% yearly), requiring attention.

Why These Metrics Matter

The Caviar Cruise screen focuses on companies that can grow value over time. MLI’s high ROIC and profit quality show it can reinvest cash effectively, while its low debt and strong margins offer protection against uncertainty. These qualities are vital for investors looking for lasting businesses, not just short-term opportunities.

Exploring Further

For investors wanting to find more companies that meet the Caviar Cruise standards, the full screen results are available here.

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.