Watts Water Technologies-A (NYSE:WTS) Excels in Caviar Cruise Quality Screen

The Caviar Cruise stock screening method is built to find companies that satisfy the strict demands of quality investing, a strategy centered on obtaining and keeping excellent businesses for the long term. This method highlights lasting competitive strengths, sound financial condition, and steady expansion in both sales and earnings, instead of short-term price discrepancies. By using numerical filters like good returns on invested capital, acceptable debt amounts, and high-grade earnings, the screen aids investors in locating businesses with lasting promise.

Watts Water Technologies-A (NYSE:WTS) is a notable pick within this structure. The company, which makes water conservation, safety, and flow control products, displays a number of traits that fit the Caviar Cruise standards.

• Revenue and EBIT Growth: In the last five years, WTS has recorded a revenue compound annual growth rate (CAGR) of 5.08%, satisfying the screen’s lowest limit of 5%. More notably, its EBIT growth during this time was 14.57%, greatly exceeding revenue expansion. This shows not just sales growth but also better operational performance and possible pricing strength, a sign of good businesses that can increase margins as time passes.

• Return on Invested Capital: With an ROIC leaving out cash, goodwill, and intangibles of 41.98%, WTS greatly passes the screen’s need of 15%. This measure is important to quality investing, since it shows how well a company produces earnings from its invested capital. A high ROIC frequently points to a lasting competitive edge and skilled leadership, both necessary for long-term growth.

• Debt Management: The company’s debt-to-free-cash-flow ratio is at a very low 0.62, much under the screen’s highest point of 5. This means that WTS could pay off its entire debt in under a year with its present cash flow, highlighting financial steadiness and lowering risk for investors. For strategies focused on quality, firm balance sheets are essential, as they offer strength in economic declines.

• Earnings Quality: WTS displays a five-year average earnings quality, calculated as free cash flow compared to net income, of 110.38%, going beyond the 75% standard. This implies that the company’s reported earnings are regularly supported by real cash production, decreasing the chance of earnings distortion or unstable methods. High earnings quality is valued by quality investors since it enables dependable dividends, share repurchases, or funding for future expansion.

A look at the full fundamental analysis report gives more background to these advantages. The report gives WTS a total score of 6 out of 10, mentioning high performance in profitability and financial condition, balanced by a somewhat high valuation. Important features include top-tier margins, a reliable record of dividend increases, and minimal debt. Still, the valuation part notes that the stock is priced at a premium relative to similar companies and the wider market, which could cause some investors to hesitate.

Although the numerical filters of the Caviar Cruise screen point to WTS as a good quality choice, investors must also think about non-numerical aspects like the company’s place in water infrastructure, a field with long-term support from city growth and environmental rules, plus its international presence and development efforts.

For those wanting to review other companies that match these conditions, the Caviar Cruise screen can be found here, where more outcomes and adjustments are provided.

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Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research and consider their financial situation and risk tolerance before making any investment decisions.