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 ≤ 6.0x 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; Gross Margins ≥ 25% 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