Quality investing has gained significant traction among investors looking for companies with sustainable competitive advantages, consistent growth, and strong financial discipline. One widely respected approach is the Caviar Cruise stock screener, inspired by the principles outlined in Luc Kroeze’s book "The Caviar Formula." This screen prioritizes companies that demonstrate strong revenue and profit growth, improving profitability over time, high returns on invested capital, manageable debt levels, and solid profit quality—essentially, firms that can generate real cash from their earnings. The goal is to identify businesses that are not just growing, but growing efficiently and with durability, making them suitable for long-term buy-and-hold strategies. INGERSOLL-RAND INC (NYSE:IR) recently surfaced through this screen, and its fundamentals suggest it may align well with these quality-focused criteria.
Meeting the Caviar Cruise Criteria
INGERSOLL-RAND INC passes several key filters of the Caviar Cruise screen, which are designed to separate high-quality businesses from the rest. Let's look at how IR stacks up against the specific metrics.
Revenue and EBIT Growth
The screen requires a 5-year compound annual growth rate (CAGR) of at least 5% for both revenue and EBIT. IR reports a revenue CAGR of 7.98% and a far stronger EBIT CAGR of 40.63%. This not only clears the minimum bar but also satisfies an additional requirement: EBIT growth exceeds revenue growth. This is significant because it indicates improving operational efficiency and pricing power—a hallmark of quality. When a company can grow profits faster than sales, it suggests economies of scale or a strong market position that allows it to pass on costs.
Return on Invested Capital (ROIC)
A core principle of the Caviar Cruise method is that a quality company must generate a high return on the capital it invests. The screen uses ROIC excluding cash, goodwill, and intangibles, and sets a minimum of 15%. IR delivers a remarkable ROICexgc of 47.83%, well above this threshold. Such a high figure implies the company is exceptionally effective at deploying capital into profitable projects, which is a strong indicator of a competitive moat and disciplined management.
Debt and Profit Quality
The screen also demands a Debt-to-Free Cash Flow ratio below 5, ensuring debt is manageable relative to the cash the business generates. IR’s Debt/FCF ratio stands at 4.12, comfortably within this range. This suggests the company could theoretically pay off all its debt in just over four years using its free cash flow, reducing financial risk.
Additionally, profit quality—measured as free cash flow relative to net income over five years—must be above 75%. IR reports a profit quality of 149.33%, meaning it actually converts more than 100% of its net income into free cash flow. This is a strong sign of earnings reliability and indicates the company is not relying on aggressive accounting practices.
Fundamental Report Overview
Beyond the screen-specific metrics, a broader look at IR’s fundamentals reveals a mixed but generally positive picture. The company scores 5 out of 10 in our overall fundamental analysis, with notable strengths in profitability. Operating margins are excellent, and gross margins are well above industry averages. However, the company carries a relatively high valuation, with a P/E ratio of 24.00 and a forward P/E of 20.61, which some may consider expensive. Growth is decent, with past EPS growth of 17.21% annually and expected future EPS growth of 13.88%, though revenue growth is expected to slow slightly. Financial health is sound, with an Altman-Z score of 3.49 indicating low bankruptcy risk and a manageable debt-to-equity ratio of 0.47. While the dividend yield is minimal at 0.10%, the payout ratio is sustainable.
Analyst Views and Market Context
The current market environment presents an interesting backdrop for quality stocks. The S&P 500 long-term trend is negative, but the short-term trend has turned positive, reflecting recent volatility and shifting sentiment. In such conditions, companies with strong fundamentals and resilient business models—like those identified through the Caviar Cruise screen—may offer relative stability. While no single screen guarantees future performance, the criteria used here are designed to filter for businesses that can weather downturns and continue compounding value over time.
Explore More Quality Candidates
This analysis of INGERSOLL-RAND INC is just one example of how the Caviar Cruise screen can uncover potential quality investments. The screen combines growth, profitability, debt discipline, and cash conversion metrics to narrow down the field. To see the full list of companies that meet these rigorous standards, click here to access the Caviar Cruise screener results and conduct your own further research.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own due diligence or consult with a qualified financial advisor before making any investment decisions.
Read full article here »
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INGERSOLL-RAND INC (NYSE:IR) Qualifies for Caviar Cruise Quality Investing Screen
Quality investing has gained significant traction among investors looking for companies with sustainable competitive advantages, consistent growth, and strong financial discipline. One widely respected approach is the Caviar Cruise stock screener, inspired by the principles outlined in Luc Kroeze’s book "The Caviar Formula." This screen prioritizes companies that demonstrate strong revenue and profit growth, improving profitability over time, high returns on invested capital, manageable debt levels, and solid profit quality—essentially, firms that can generate real cash from their earnings. The goal is to identify businesses that are not just growing, but growing efficiently and with durability, making them suitable for long-term buy-and-hold strategies. INGERSOLL-RAND INC (NYSE:IR) recently surfaced through this screen, and its fundamentals suggest it may align well with these quality-focused criteria.
Meeting the Caviar Cruise Criteria
INGERSOLL-RAND INC passes several key filters of the Caviar Cruise screen, which are designed to separate high-quality businesses from the rest. Let's look at how IR stacks up against the specific metrics.
Revenue and EBIT Growth
The screen requires a 5-year compound annual growth rate (CAGR) of at least 5% for both revenue and EBIT. IR reports a revenue CAGR of 7.98% and a far stronger EBIT CAGR of 40.63%. This not only clears the minimum bar but also satisfies an additional requirement: EBIT growth exceeds revenue growth. This is significant because it indicates improving operational efficiency and pricing power—a hallmark of quality. When a company can grow profits faster than sales, it suggests economies of scale or a strong market position that allows it to pass on costs.
Return on Invested Capital (ROIC)
A core principle of the Caviar Cruise method is that a quality company must generate a high return on the capital it invests. The screen uses ROIC excluding cash, goodwill, and intangibles, and sets a minimum of 15%. IR delivers a remarkable ROICexgc of 47.83%, well above this threshold. Such a high figure implies the company is exceptionally effective at deploying capital into profitable projects, which is a strong indicator of a competitive moat and disciplined management.
Debt and Profit Quality
The screen also demands a Debt-to-Free Cash Flow ratio below 5, ensuring debt is manageable relative to the cash the business generates. IR’s Debt/FCF ratio stands at 4.12, comfortably within this range. This suggests the company could theoretically pay off all its debt in just over four years using its free cash flow, reducing financial risk.
Additionally, profit quality—measured as free cash flow relative to net income over five years—must be above 75%. IR reports a profit quality of 149.33%, meaning it actually converts more than 100% of its net income into free cash flow. This is a strong sign of earnings reliability and indicates the company is not relying on aggressive accounting practices.
Fundamental Report Overview
Beyond the screen-specific metrics, a broader look at IR’s fundamentals reveals a mixed but generally positive picture. The company scores 5 out of 10 in our overall fundamental analysis, with notable strengths in profitability. Operating margins are excellent, and gross margins are well above industry averages. However, the company carries a relatively high valuation, with a P/E ratio of 24.00 and a forward P/E of 20.61, which some may consider expensive. Growth is decent, with past EPS growth of 17.21% annually and expected future EPS growth of 13.88%, though revenue growth is expected to slow slightly. Financial health is sound, with an Altman-Z score of 3.49 indicating low bankruptcy risk and a manageable debt-to-equity ratio of 0.47. While the dividend yield is minimal at 0.10%, the payout ratio is sustainable.
Analyst Views and Market Context
The current market environment presents an interesting backdrop for quality stocks. The S&P 500 long-term trend is negative, but the short-term trend has turned positive, reflecting recent volatility and shifting sentiment. In such conditions, companies with strong fundamentals and resilient business models—like those identified through the Caviar Cruise screen—may offer relative stability. While no single screen guarantees future performance, the criteria used here are designed to filter for businesses that can weather downturns and continue compounding value over time.
Explore More Quality Candidates
This analysis of INGERSOLL-RAND INC is just one example of how the Caviar Cruise screen can uncover potential quality investments. The screen combines growth, profitability, debt discipline, and cash conversion metrics to narrow down the field. To see the full list of companies that meet these rigorous standards, click here to access the Caviar Cruise screener results and conduct your own further research.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own due diligence or consult with a qualified financial advisor before making any investment decisions.
Read full article here »