PARSONS CORP (NYSE:PSN) – A Quality Stock in Defense and Infrastructure

PARSONS CORP (NYSE:PSN) stands out as a potential candidate for quality investors, according to our Caviar Cruise screening methodology. The company operates in national security and global infrastructure markets, offering disruptive technologies and services. Its financial metrics align with several key criteria for quality investing, including strong profitability, efficient capital allocation, and manageable debt levels.

Why PSN Fits the Quality Investing Criteria

• High Return on Invested Capital (ROIC): PSN’s ROIC (excluding cash and goodwill) is 27.64%, well above the 15% threshold for quality stocks. This indicates efficient use of capital to generate profits.
• Strong EBIT Growth: The company has delivered a 49.37% 5-year EBIT growth rate, reflecting improving operational profitability.
• Healthy Debt Management: With a Debt-to-Free Cash Flow ratio of 2.36, PSN could repay its debt in under three years using current cash flows, signaling financial stability.
• Profit Quality: PSN’s 5-year average profit quality is 238.32%, meaning it converts net income into free cash flow at an exceptional rate.

Fundamental Analysis Summary

PSN earns a 5/10 overall fundamental rating, with strengths in profitability but some concerns around valuation. Key takeaways:

• Profitability (7/10): Strong margins and returns, though gross margins are below industry peers.
• Financial Health (5/10): Solid solvency metrics (Altman-Z score of 3.36) but increasing share count and debt-to-assets ratio.
• Valuation (3/10): Priced at a premium (P/E of 22.33), but growth prospects may justify the valuation for long-term investors.
• Growth (5/10): Historical revenue and EPS growth are robust, though future estimates suggest moderation.

For investors seeking quality stocks with strong operational performance, PSN’s high ROIC, cash flow generation, and niche market position make it worth further research.

Our Caviar Cruise screener lists more quality investment candidates. For a deeper dive, review the full PSN fundamental report.

Disclaimer

This is not investing advice. The observations here are based on current data, but investors should conduct their own analysis before making decisions.