MSA Safety Inc (NYSE:MSA): A Quality Investment with Strong Returns and Sound Finances

Safety equipment maker MSA Safety Inc (NYSE:MSA) has appeared as an interesting option for investors using a quality investing plan. The "Caviar Cruise" screen, based on the ideas of quality investing, looks for companies with a record of sound financial condition, earnings, and lasting expansion. This system favors businesses that show operational superiority through high returns on capital, acceptable debt amounts, and the capacity to regularly turn accounting earnings into free cash flow. The aim is to find industry front-runners suitable for a lasting, buy-and-hold investment method.

Performance and Profitability

MSA Safety displays a sound financial condition that matches the main parts of quality investing. The company has shown a capacity to increase its earnings at a quicker pace than its sales, a main sign of getting better at operations and possible price strength.

• EBIT Growth (5Y CAGR): 12.36%
• Revenue Growth (5Y CAGR): 4.60%

This difference, where EBIT growth is much higher than revenue growth, implies the company is effectively using its size or has solid market positions that let it manage expenses and widen earnings margins. For a quality investor, this pattern is important as it shows a business that is not only growing larger, but also becoming fundamentally improved and more profitable as time passes.

Return on Invested Capital

A fundamental part of the quality investing view is judging how well a company uses its money to produce earnings. MSA Safety is very good in this area, reporting a strong Return on Invested Capital (leaving out cash, goodwill, and intangibles) of 28.62%. This number is much higher than the screen's lowest limit of 15%. A high ROIC shows that MSA's leadership is very skilled at directing money to profitable projects and plans. It points to a lasting market edge, as the company makes better returns on its investments compared to many of its competitors, building notable value for shareholders.

Financial Health and Cash Flow

Quality investors look for companies with sound financial statements that can endure economic slumps. MSA Safety shows a state of financial steadiness, especially when looking at its debt and cash flow creation.

• Debt-to-Free Cash Flow: 2.69
• 5-Year Average Profit Quality: 213.06%

The Debt-to-FCF ratio of 2.69 is comfortably under the screen's goal of below 5, meaning the company could in theory pay off all its existing debt in under three years using its present free cash flow. This offers a notable safety buffer. Also, the Profit Quality measure, which checks the amount of net income changed into free cash flow, is very high. A number over 100% implies the company is creating more cash than its accounting earnings, often a mark of an established business with little need for new investment or very effective operations. This sound cash flow gives MSA the ability to pay for dividends, conduct share repurchases, or put money into strategic chances without needing outside funds.

Fundamental Analysis Overview

A detailed fundamental analysis report for MSA gives the company a good rating of 6 out of 10. The report points out very good scores for both earnings and financial condition. Main strong points include industry-best margins and returns on assets and equity. The company's ability to pay debts and its liquidity are sound, with a good Altman-Z score and current ratio pointing to a low chance of financial trouble. While its price is viewed as reasonable and not low, and its recent sales expansion has been moderate, its very good earnings and financial steadiness form an interesting base for investors focused on quality.

Suitability for Quality Investing

When measured against the wider standards for quality investments, MSA Safety has a good standing. The company works in the necessary safety sector, which is backed by lasting tendencies in workplace rules and industrial safety standards around the world. Its worldwide presence and known name, including items like the V-Gard helmet, suggest a lasting market position. The business plan is fairly simple to grasp, concentrating on the creation and sale of protective gear. While a close look into leadership skill and exact price strength is outside a number-based screen, the company's high and improving margins are a solid positive sign in this respect.

For investors wanting to find other companies that meet this strict quality screen, you can view the complete Caviar Cruise screen results here.

In conclusion, MSA Safety offers an interesting argument for quality investors. Its high return on capital, sound cash flow creation, acceptable debt, and pattern of earnings growth outpacing sales growth describe a well-run, financially steady company in a necessary industry. These traits are exactly what the Caviar Cruise screen is made to find.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation to buy or sell any security, or an offer to provide investment advisory services. All investing involves risk, including the possible loss of principal.