Tecnoglass Inc. (NYSE:TGLS) Identified as a High-Quality Stock by Caviar Cruise Strategy

TECNOGLASS INC (NYSE:TGLS) has been identified through an investment screening method known as the Caviar Cruise strategy. This approach is focused on finding high-quality companies appropriate for long-term, buy-and-hold portfolios. The philosophy is based on owning businesses with lasting competitive advantages, very good profitability, and sound financial health, with the idea that quality often supports a fair price. The screen uses a strict set of quantitative filters to find companies that have shown steady growth, high returns on capital, and strong cash flow generation. Tecnoglass, a manufacturer of architectural glass and aluminum products for the construction industry, seems to satisfy these strict criteria.

Strong Historical Growth and Profitability Increase

A fundamental part of the quality investing approach is finding companies with a confirmed history of growth. The Caviar Cruise strategy needs a minimum 5% annual growth in both revenue and EBIT (Earnings Before Interest and Taxes) over a five-year period. More significantly, it requires that profit growth is faster than sales growth, indicating better operational efficiency and possible pricing power.

Tecnoglass performs very well in this area, displaying not just growth, but a major increase in profitability.

• Revenue Growth (5Y CAGR): 7.33%
• EBIT Growth (5Y CAGR): 31.02%

The large difference between EBIT growth and revenue growth is an important sign of quality. It implies that Tecnoglass has effectively used its operations, probably gaining from economies of scale or a firm competitive position that lets it manage costs and improve margins over time. This fits well with the strategy's aim of finding businesses that become more profitable as they get larger.

Very High Returns on Capital

For quality investors, the efficiency with which a company uses its capital is crucial. The screen requires a Return on Invested Capital (ROIC), excluding cash and intangibles, of greater than 15%. This metric calculates how well a company produces profits from the capital invested in its core operations. A high and steady ROIC is frequently a sign of a lasting competitive advantage.

Tecnoglass reports a notable ROICexgc of 26.76%, well above the required level. This shows that for every dollar invested in the business, Tecnoglass produces significant profit. This high return is a main reason the company gets a perfect 10 out of 10 for profitability in its fundamental analysis report. It shows a very efficient business model and is a critical factor for investors looking for compounders for their portfolios.

Sound Financial Health and Cash Flow

Quality investing places great importance on financial safety. The screen assesses this by examining the Debt-to-Free Cash Flow ratio, requiring a figure below 5. This ratio shows how many years it would take the company to pay off all its debt using its current annual cash flow. A low ratio indicates a firm balance sheet and lower financial risk.

Tecnoglass shows very good financial health in this area, with a Debt/FCF ratio of 1.99. This means it could in theory remove its entire debt in less than two years with its available cash flow. This conservative debt level, paired with a good Altman-Z score, leads to a high health rating of 8 out of 10. Additionally, the company shows high-quality earnings, with a five-year average Profit Quality of 90.99%, indicating that its accounting profits are regularly turned into real, usable cash.

Valuation and Fundamental Summary

While quality investors are prepared to pay a fair price for a very good business, valuation is still a factor. Tecnoglass trades at a Price-to-Earnings (P/E) ratio of 16.45, which is seen as reasonable compared to both the wider market and its industry peers. The company's fundamental analysis report gives it an overall rating of 8 out of 10, describing it as a fundamentally firm stock with very good profitability and health, making it a significant candidate for quality investing. A detailed breakdown of the fundamental analysis is available for more review.

A Candidate for More Research

Tecnoglass presents a strong profile based on the quantitative filters of the Caviar Cruise strategy. Its firm growth, very high profitability, and solid financial base match the main principles of quality investing. Of course, these quantitative factors should be supported with qualitative research into areas such as the company's competitive position, management quality, and exposure to long-term global construction trends.

For investors interested in finding other companies that pass this strict quality screen, you can view the current Caviar Cruise screening results here.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any securities. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.