Because the FTSE 100 index continues hitting new highs, savvy buyers are looking for high quality firms that may proceed delivering robust returns. Of the hundred firms within the index, one identify that stands out to me is Intertek (LSE:ITRK), a number one high quality assurance supplier working in over 100 international locations. Right here’s why I feel it deserves a more in-depth look.

Monitor report

Intertek has been round since 1885, establishing itself as a pioneer in testing, inspection, and certification providers throughout numerous industries like shopper merchandise, healthcare, vitality, agriculture, and extra. This prolonged monitor report exhibits the corporate is greater than able to efficiently navigating numerous financial cycles and disruptions over its 138-year historical past.

As a number one high quality assurance supplier spanning a number of sectors, Intertek enjoys a powerful positioning in a number of compelling development areas. The continued growth of shopper merchandise, vitality transition options, provide chain visibility, and meals security measures all current alternatives for testing and certification providers. Its international scale and complete trade experience create aggressive benefits.

The basics look rock-solid. Intertek grew earnings per share by 9.2% over the previous yr, far outperforming the UK market’s general 4.4% return. It has delivered optimistic earnings development averaging 0.7% yearly, although this severely lags the skilled providers trade’s development of 11.2%. I’m not too nervous about this although, as analysts forecast earnings to speed up, rising at a sturdy 9.7% clip yearly going ahead.

Dangers

The enterprise does carry a higher-than-ideal debt load with a debt-to-equity ratio of 70% on its £900m debt. With revenue margins barely decrease than the earlier yr, and with compensation for the CEO rising by 20% over the identical interval, this could possibly be a regarding setup for buyers.

A big share of general expenditure goes in direction of dividends. The ahead dividend yield sits at an honest 2.3%, although the forecasted 3.7% yield three years from now appears extra engaging. Nevertheless, with optimistic free money flows, a 61% dividend payout ratio, an honest curiosity protection ratio of 12.8 occasions and ample money reserves of £299m on the stability sheet, I’d say the corporate’s obligations look like sustainable.

Valuation

Whereas shares don’t seem considerably undervalued, a discounted money circulation calculation (DCF) means that there might nonetheless be about 8% development earlier than reaching honest worth. Shares at the moment commerce at 25.9 occasions trailing earnings, a premium to the skilled providers trade however possible merited by engaging development prospects. I’m additionally inspired by the quantity of shares that administration have been shopping for in latest months, with many board members choosing up extra shares in March and none promoting within the final yr.

Total

Total, Intertek checks most of the packing containers I search for — robust fundamentals, seen development drivers, strong earnings, and sound funds. To me, it appears well-positioned to proceed delivering worth if the FTSE 100’s latest rally continues. I’ll be shopping for shares on the subsequent alternative.