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Posted September 12, 2025 at 9:45 am
This week, we cover Oracle Corporation (ORCL, rated ‘Underweight’) and The Campbell’s Company (CPB, rated ‘Buy’). ORCL’s stock saw a 36% surge on Wednesday, posting its best trading day since 1992, after the firm reported $455B in contract backlog, a 359% increase from a year earlier. CPB, a High Quality and Cheap name, recently announced that the firm is planning to end the use of synthetic food dyes in its food or beverage products starting next year.
In this report we screen for companies that are high Quality in the EVA framework that are investing heavily relative to their prior trend in Capex. These firms still have decent absolute Profitability (deep economic moat) today and are investing in the future.
A few times each year, we re-visit the Russell 2000 Value and Growth Indexes to identify discrepancies between our view of value and growth and Russell’s. We provide a list of companies overweight in the Russell 2000 Value Index that score expensive in our Value factor and unattractive in PRVit, and a list of the most attractive and cheapest names in the index.
Aggregate EVA Momentum for the Russell 2000 Index hit an all-time low of -2.9% in February 2024, and over the last 18 months the EVA Momentum has rebounded to -0.2%. As we have noted, when growth is scarce, buy growth; and while EVA Momentum has inflected up, it remains below most of the index’s history.
The global Construction & Engineering industry continues to look attractive in the PRVit framework after seeing strong returns this year. Quality (P-R) is rated unfavorably for the global industry aggregate, but Value scores remain low (relatively cheap), making the industry look attractive overall.
EVA Profitability has contracted through 2025 so far, while EVA growth looks to have bottomed out in negative territory. Asset efficiency has improved, supported by top-line growth turning positive; however, EBITDAR Margin remains pressured. Large Cap firms, on average, look unattractive as strong Quality is offset by high Valuations. Investor expectations for value creation are trading around the upper end of the long-term range.
On average, Large Cap firms look unattractive in the PRVit model, as high Valuations outweigh strong Quality. EVA Margin has contracted to record lows, pressured by deteriorating asset efficiency and relatively weak EBTIDAR Margin. With EVA Momentum having seen a continued recovery over the last two years, investor expectations for incremental EVA creation going forward have turned very bullish.
Our Chart of the Week last week showed the performance of our Quality and Value factors. This week we provide similar graphs for key regions and countries. These plot the compound log returns of the factors for all companies in the region/country with a market cap over $1B.
In this week’s ‘High Quality Today & Spending for Tomorrow’ report, we look at capex trends across the different sectors (ex-Financials & Real Estate) and screen for firms that are high Quality (P-R) and heavily investing for the future. What is noticeable is that eight of nine sectors are seeing an increase in spending in 2025, with only the Energy sector seeing a YoY decline in investment. Capex trends in IT are being driven by hyperscalers—Amazon (AWS), Microsoft (Azure), and Google (GCP)—but we are seeing a broad trend in increased spending across the sectors in PP&E and R&D investment.
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