QUALYS INC (NASDAQ:QLYS) Passes Peter Lynch Investment Screen with Strong Growth and Zero Debt

QUALYS INC (NASDAQ:QLYS) has been identified by an investment screen built on the ideas of famous investor Peter Lynch. His method, explained in One Up on Wall Street, looks for companies with lasting growth, fair valuations, and good financial condition for long-term investing. This process, frequently seen as Growth at a Reasonable Price (GARP), stays away from speculative stocks and chooses companies that are profitable, easy to grasp, and available at prices that do not overstate their future potential.

Matching the Peter Lynch Standards

The screen uses particular, measurable filters to locate companies that fit Lynch's thinking. QUALYS satisfies these main needs, which are set to find businesses with a confirmed growth history that is not extreme, good profitability, and a solid balance sheet.

• Lasting Earnings Growth: Lynch preferred companies increasing earnings between 15% and 30% each year, as this speed is seen as maintainable. QUALYS shows this with a 5-year Earnings Per Share (EPS) growth rate of 21.24%, well inside the desired bracket. This points to a past of good, controlled increase without the warning sign of very fast growth that can be hard to continue.
• Fair Valuation using PEG Ratio: A central part of the Lynch system is the Price/Earnings to Growth (PEG) ratio, which should be 1.0 or lower. This measure helps decide if a stock's price is fair compared to its growth rate. QUALYS has a PEG ratio of 0.96, indicating that its present valuation is acceptable relative to its past earnings growth, a main point for GARP investors looking for value with growth.
• Good Profitability (ROE): Lynch searched for companies that are very effective at creating profits from shareholder equity. QUALYS greatly passes the screen's 15% minimum with a Return on Equity (ROE) of 35.73%. This high level of profitability suggests a lasting competitive edge and skilled management, both important for long-term wealth building.
• Financial Condition (Debt & Liquidity): A careful balance sheet is important for surviving economic slowdowns. The screen demands a Debt-to-Equity ratio under 0.6, and QUALYS is notable with a perfect ratio of 0.0, meaning it functions with no debt. Also, its Current Ratio of 1.38 satisfies the screen's need to be at least 1.0, showing it has enough short-term assets to meet its near-term liabilities.

Fundamental Condition Summary

A more detailed examination of the full fundamental analysis for QUALYS supports the results from the screen. The company gets a good total fundamental rating of 7 out of 10. Its most notable strong points are in high profitability and excellent financial condition.

The company's margins are top in its industry, with a Profit Margin of 28.96% and an Operating Margin of 32.55%. Its Return on Invested Capital (ROIC) of 29.68% further highlights its effectiveness. From a health standpoint, the lack of debt and a high Altman-Z score indicate a very small chance of financial trouble. While its valuation is viewed as acceptable instead of very cheap, and its future growth estimates have slowed next to its past performance, the basic business quality stays high.

A Stock for the Long Term

For investors who agree with the Peter Lynch method, QUALYS offers a strong case. It is not a speculative gamble but a well-known company in the cloud security field, a contemporary, necessary service that matches the "invest in what you know" idea. It has shown a capacity to increase earnings at a maintainable rate, is very profitable, and has a clean balance sheet, all while being offered at a valuation that its growth past seems to support.

This assessment was produced from a stock screen following the Peter Lynch strategy. You can review other companies that currently meet this screen by seeing the complete list of results here.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation to buy or sell any security, or an endorsement of any investment strategy. All investments involve risk, including the possible loss of principal. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.