RB Global Inc (NYSE:RBA) Meets Caviar Cruise Quality Investing Criteria with Strong EBIT Growth and High ROIC

The Caviar Cruise stock screening strategy is based on quality investing, a method that looks for companies with solid fundamentals, lasting competitive edges, and steady growth. Inspired by Luc Kroeze’s The Caviar Formula, this strategy focuses on holding businesses for the long term that show strong profitability, smart capital use, and stability through different economic conditions. The screen uses strict quantitative filters, like revenue and EBIT growth, high return on invested capital (ROIC), reasonable debt levels, and reliable profit quality, to find companies worth deeper study.

RB Global Inc (NYSE:RBA) appears as a candidate from this screen, displaying traits that match quality investing principles. Below, we review how RBA fits the Caviar Cruise criteria and why these measures are important for investors looking for lasting businesses.

Key Quality Measures and RBA’s Results

1. Revenue and EBIT Growth

   • The Caviar Cruise screen asks for at least 5% yearly growth in both revenue and EBIT over five years. While RBA’s 5-year revenue CAGR of 3.7% is slightly below, its EBIT growth of 29.0% is much higher than the requirement. This difference points to better operational efficiency, pricing strength, or cost savings—traits of a quality business. The screen values EBIT growth over revenue to avoid companies that grow only by expanding sales.

2. High Return on Invested Capital (ROIC)

   • ROIC shows how well a company earns profits from its capital. RBA’s ROICexgc (excluding cash, goodwill, and intangibles) is 19.7%, above the 15% minimum. This suggests effective capital use and a competitive edge, key for long-term growth.

3. Debt Sustainability

   • The Debt-to-Free Cash Flow (FCF) ratio of 4.0 fits within the screen’s acceptable range (under 5). This means RBA could pay off its debt in four years using current FCF, showing financial flexibility. Free cash flow supports dividends, buybacks, or reinvestment—important for shareholder returns.

4. Profit Quality

   • RBA’s 5-year average profit quality (FCF/Net Income) is 143.6%, well above the 75% threshold. This indicates the company turns accounting profits into cash better than peers, lowering the risk of earnings manipulation. High profit quality often points to a mature business with careful capital management.

Fundamental Analysis Overview

According to ChartMill’s fundamental report, RBA scores neutrally on profitability and financial health but does well in margins (operating margin of 17.8%, beating 85.5% of industry peers) and growth (20.8% EPS CAGR over five years). Concerns include a falling gross margin and high valuation (P/E of 31.02), though its forward P/E of 25.49 is below the industry average.

Why These Measures Matter for Quality Investors

The Caviar Cruise criteria aim to find companies with:

• Lasting Growth: EBIT growing faster than revenue shows operational strength.
• Capital Effectiveness: High ROIC signals a strong competitive position.
• Financial Stability: Low debt/FCF ensures resilience in tough times.
• Earnings Trustworthiness: Profit quality confirms reported earnings.

RBA’s profile—especially its ROIC, profit quality, and EBIT growth—suggests it operates in a stable niche (global commercial asset transactions) with scalable operations. Still, investors should consider its high valuation against growth prospects.

Find More Quality Options

For investors searching for similar opportunities, the full Caviar Cruise screen results can offer more ideas.

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