For investors aiming to assemble a portfolio of durable, long-term holdings, the ideas of quality investing offer a strong framework. This method centers on finding companies with lasting competitive strengths, sound financial condition, and the capacity to produce steady, high-grade profits over many years. One orderly way to find these companies is the "Caviar Cruise" stock screen, which uses a set of strict, measurable filters to separate businesses with better fundamentals. The screen reviews past performance using maintained revenue and profit increase, judges capital effectiveness using high returns on invested capital, and inspects financial soundness with measures like debt amounts and profit grade. A company that clears this demanding screening process deserves more attention from investors concentrated on quality.
A Detailed Examination of United Therapeutics
United Therapeutics Corp. (NASDAQ:UTHR) appears as a leading candidate from this quality-centered screen. The biotechnology company, which creates and sells therapies for pulmonary arterial hypertension and other serious illnesses, shows the signs of a quality business. Its financial picture matches firmly with the central principles of the Caviar Cruise method, which emphasizes lasting increase, outstanding profitability, and a strong balance sheet.
Satisfying the Central Quality Standards
The Caviar Cruise screen rests on several basic filters, each made to gauge a different part of business quality. United Therapeutics not only satisfies but frequently surpasses these standards.
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Maintained and Profitable Increase: The screen calls for a minimum 5% compound annual growth rate (CAGR) for both revenue and EBIT (earnings before interest and taxes) over five years. For quality investors, this twin increase shows a business that is growing its top line while also getting better at operational efficiency. United Therapeutics provides solid numbers here, with a 5-year revenue CAGR of 11.21% and an even stronger EBIT CAGR of 17.97%. Importantly, its EBIT increase is faster than its revenue increase, a main screen filter that points to widening profit margins and possible pricing strength.
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Outstanding Capital Use: Maybe the most important measure for quality investing is the Return on Invested Capital (ROIC), which gauges how well a company produces profits from its capital base. The screen establishes a high level at 15%. United Therapeutics does very well, reporting an ROIC (leaving out cash, goodwill, and intangibles) of 30.07%. This shows management's superior ability to use capital to build shareholder value, a required feature for a long-term holding.
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Financial Soundness and High-Grade Earnings: The screen also requires financial steadiness by capping the Debt-to-Free Cash Flow ratio at under 5 and demanding a 5-year average Profit Quality above 75%. The first measure confirms the company can easily handle or remove debt with its cash production. United Therapeutics is notable with a Debt/FCF ratio of 0.0, showing a net-cash status and great financial room to maneuver. At the same time, its Profit Quality of 98.64% indicates that almost all of its accounting net income becomes real, usable free cash flow. This pairing signals earnings are not only book profits but are supported by actual cash, lowering financial danger and supplying plenty of means for dividends, buybacks, or new investment.
Fundamental Analysis Overview
A look at the company's detailed fundamental report supports this quality argument. United Therapeutics receives a solid overall fundamental score of 7 out of 10. Its profitability is graded as "excellent," with sector-leading operating and profit margins. Financial condition is also a notable strong point, with a perfect solvency score fueled by its debt-free balance sheet and high Altman-Z score. While its price is not very low, it seems fair compared to both its industry group and the wider market, particularly when weighing its high increase and profitability. The growth picture stays firm, with double-digit past increase in revenue and EPS anticipated to persist, though possibly at a slower rate.
Is It a Quality Match?
For an investor using a quality plan, United Therapeutics offers a strong profile. It works in a specialized treatment area with high obstacles to entry, hinting at a lasting competitive edge. Its financials are marked by high-margin, cash-producing operations, top-tier returns on capital, and a clean balance sheet, all central goals of the Caviar Cruise screen. While price always needs thoughtful study and the biotech sector has built-in regulatory and development risks, the company's fundamental traits match closely with the standards wanted by buy-and-hold quality investors.
Finding More Quality Options
United Therapeutics is one of the companies that clears the strict Caviar Cruise screen. Investors wanting to see the complete list of companies that satisfy these quality standards can run the screen on their own 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 due diligence and consult with a qualified financial advisor before making any investment decisions.
