With the FTSE 100 flying, I love the look of this company

The FTSE 100 index has been in rally mode over the last few months, but I think one of it’s companies could be well worth a closer look.

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As the FTSE 100 index continues hitting new highs, savvy investors are searching for quality companies that can continue delivering strong returns. Of the hundred companies in the index, one name that stands out to me is Intertek (LSE:ITRK), a leading quality assurance provider operating in over a hundred countries. Here’s why I think it deserves a closer look.

Track record

Intertek has been around since 1885, establishing itself as a pioneer in testing, inspection, and certification services across diverse industries like consumer products, healthcare, energy, agriculture, and more. This lengthy track record shows the company is more than capable of successfully navigating various economic cycles and disruptions over its 138-year history.

As a leading quality assurance provider spanning multiple sectors, Intertek enjoys a strong positioning in several compelling growth areas. The continued expansion of consumer products, energy transition solutions, supply chain visibility, and food safety measures all present opportunities for testing and certification services. Its global scale and comprehensive industry expertise create competitive advantages.

The fundamentals look rock-solid. Intertek grew earnings per share by 9.2% over the past year, far outperforming the UK market’s overall 4.4% return. It has delivered positive earnings growth averaging 0.7% annually, though this severely lags the professional services industry’s growth of 11.2%. I’m not too worried about this though, as analysts forecast earnings to accelerate, growing at a robust 9.7% clip annually going forward.

Risks

The business does carry a higher-than-ideal debt load with a debt-to-equity ratio of 70% on its £900m debt. With profit margins slightly lower than the previous year, and with compensation for the CEO growing by 20% over the same period, this could be a concerning setup for investors.

A large percentage of overall expenditure goes towards dividends. The forward dividend yield sits at a decent 2.3%, though the forecasted 3.7% yield three years from now looks more enticing. However, with positive free cash flows, a 61% dividend payout ratio, a decent interest coverage ratio of 12.8 times and ample cash reserves of £299m on the balance sheet, I’d say the company’s obligations appear to be sustainable.

Valuation

While shares don’t appear significantly undervalued, a discounted cash flow calculation (DCF) suggests that there could still be about 8% growth before reaching fair value. Shares currently trade at 25.9 times trailing earnings, a premium to the professional services industry but likely merited by attractive growth prospects. I’m also encouraged by the amount of shares that management have been buying in recent months, with many board members picking up more shares in March and none selling in the last year.

Overall

Overall, Intertek checks many of the boxes I look for — strong fundamentals, visible growth drivers, solid income, and sound finances. To me, it looks well-positioned to continue delivering value if the FTSE 100’s recent rally continues. I’ll be buying shares at the next opportunity.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Gordon Best has no position in any of the shares mentioned. The Motley Fool UK has recommended Intertek Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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