Victory Capital Holdings (NASDAQ:VCTR) Identified as a High-Quality Long-Term Investment

Victory Capital Holdings - A (NASDAQ:VCTR) has been identified using the Caviar Cruise stock screening method, a system focused on finding good companies for long-term investment. This approach prioritizes measurable business quality over short-term price changes, concentrating on firms with high profitability, sound finances, and lasting growth. The idea supporting this screen is that holding the best companies for long periods, perhaps permanently, is a way to create wealth. The filters are made to find businesses with durable competitive positions, effective operations, and the capacity to produce significant cash flows.

Meeting the Core Quality Investing Criteria

The Caviar Cruise screen uses a detailed set of filters to evaluate a company's quality. Victory Capital satisfies or goes beyond many of these important standards, which are key to the quality investing idea.

• Exceptional Return on Invested Capital: A fundamental part of quality investing is effective capital use. The screen asks for a ROIC excluding cash, goodwill, and intangibles (ROICexgc) of at least 15%. Victory Capital greatly exceeds this with a number of 340.99%, showing a remarkable capacity to create earnings from the capital put into its main business. This is a strong sign of a lasting competitive edge and very good management.
• Strong and Improving Profitability: The method requires that a company's main earnings increase more quickly than its sales, an indicator of operational efficiency and market strength. Victory Capital's 5-year EBIT CAGR of 14.63% shows solid profit expansion. While a direct 5-year revenue CAGR comparison is not in the data given, the company's good margins and recent yearly revenue increase of 20.90% point to a sound and profitable growth path.
• Solid Financial Health: To make sure a company is not carrying too much debt, the screen applies a Debt-to-Free Cash Flow ratio under 5. Victory Capital's ratio of 3.67 is within this acceptable limit, meaning it could pay off all its debt in less than four years using its present cash flow. This offers a good safety buffer and monetary adaptability, important factors for a long-term investor.
• High-Quality Earnings: The screen searches for a 5-year average Profit Quality, the change of net income into free cash flow, above 75%. Victory Capital does very well here with a ratio of 126.85%. This indicates the company is producing more cash than its reported earnings show, a characteristic of a sound business with little dependence on non-cash items and high earnings quality.

Fundamental Analysis Overview

An examination of Victory Capital's detailed fundamental report supports the results from the quality screen. The company has an overall fundamental rating of 7 out of 10, placing it well within the Capital Markets industry. The review shows an attractive profile:

• Profitability: The company rates highly on profitability (8/10), having margins that do better than most industry competitors. Its Operating Margin of 46.16% is higher than 80% of the industry, and both its Profit and Gross Margins have gotten better in recent years.
• Valuation: Even with its strong business results, the stock seems fairly valued, scoring 8 out of 10 on valuation. Its Price-to-Earnings ratio of 12.34 is lower than the wider S&P 500 and a majority of its industry rivals.
• Growth: The company shows good growth momentum with a score of 8 out of 10. Importantly, analysts expect a pickup in both sales and earnings per share growth for the next few years.
• Financial Health: The health score is a good 6 out of 10, backed by the acceptable debt amounts found in the screen. The report affirms the Debt-to-FCF ratio is a positive point, performing better than over 76% of the industry.

A Candidate for the Quality Investor

For an investor using a quality approach, Victory Capital offers an attractive profile. It runs a varied asset management company with several investment platforms, a structure that can gain from long-term patterns in global wealth management. The company's very high return on invested capital and high profit margins indicate a firm competitive standing and a capacity to influence pricing. Its strong free cash flow production supports a rising dividend and also allows for paying off debt or funding future expansion, all while having a price that does not seem too high.

The Caviar Cruise screen is an effective initial step for finding companies with quality traits. For investors wanting to look at other companies that meet this strict set of filters, you can view the complete and updated screen results here.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. The information presented should not be used as the sole basis for any investment decision. Readers are encouraged to conduct their own thorough research and consult with a qualified financial advisor before making any investment decisions.