Quantitative Analysis

With every investment opportunity, we apply a disciplined financial screen to distinguish businesses with exceptional earning power and cash generating characteristics.  Identifying companies that are capable of strong cash flow generation is a key indicator for determining whether or not a company will be able to execute sustainable growth while generating reasonable cash return on invested capital.

Our financial screening process focuses on the following metrics:

  • Valuation: Investment capitalization ≤ 7.0x last twelve months' earnings before interest and taxes (EBITA)

  • Return on Capital: EBITA ≥ 30% of total capital employed (interest-bearing debt plus net worth)

  • Profitability: EBITA ≥ 15% of sales (preference for ≥ 20%) ; Gross Margins ≥ 30% of sales

  • Working Capital Efficiency: Receivables and inventory combined ≤ 30% sales

  • Capital Intensity: Fixed Assets ≤ 30% of sales

  • Cash Generation: Multi-year history of postive cash generation