10 Companies with Comfortably Low Debt

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Radar List: Low Debt

The companies with low debt generated by the Kapitall List tool have the lowest debt ratios, computed as liabilities/assets. These companies happen to be characterized with an Average Price of Profit of 15 and an average 1-Year Return of 22%. Companies with low debt relative to their assets generally (but not always) operate in mature markets and generate steady revenue. Investors should look for companies that hold cash and marketable assets that are highly liquid. This gives the company the ability to pay for future acquisitions.

Companies with low debt may also appear to be “safer” investments, suitable for investors who do not want exposure to high risk, but do not be fooled. Look at the share price for two companies that declined substantially in the past year in the chart below: CIENA (CIEN) and Navistar (NAV). Click play to view the return of these companies in one year, compared to one month:

Note: Kapitall Compar-o-matic tool displays a maximum of 9 companies

A word of caution: stock lists generated by number crunching give only a quantitative point of view. It does not give a snapshot on qualitative factors. For example, the health of the sector or effectiveness of management is not reflected upon directly. This list gives a starting point for investors to create watch lists. Investors may dig deeper, by running Company Snapshot and Number Cruncher. The Number Cruncher provides data on the financials and the SEC filings. These filings provide a past snapshot of company performance, but their easy availability on Kapitall give investors an edge. Few investors read SEC filings, so by reading them, you are well ahead of everyone else.

Business Section: Investing Ideas

Taken together, the low debt radar list represents companies in 8 out of the 17 sectors, giving the list a diversification score of 68%.

The 10 companies on the Kapitall list as of October 26 2012 are sorted by market capitalization:

1. USG Corporation (USG, Earnings, Analysts, Financials): Engages in the manufacture and distribution of building materials worldwide. Market cap at $2.71B, most recent closing price at $25

2. Domino’s Pizza, Inc. (DPZ, Earnings, Analysts, Financials): Operates as a pizza delivery company in the United States and internationally. Market cap at $2.3B, most recent closing price at $40.49.

3. Marriott International, Inc. (MAR, Earnings, Analysts, Financials): Operates and franchises hotels and related lodging facilities worldwide. Market cap at $11.62B, most recent closing price at $36.82.

4. Limited Brands, Inc. (LTD, Earnings, Analysts, Financials): Operates as a retailer of women’s intimate and other apparel, beauty and personal care products, and accessories in the United States and Canada. Market cap at $13.68B, most recent closing price at $47.60.

5. Philip Morris International, Inc. (PM, Earnings, Analysts, Financials): Engages in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States. Market cap at $148.82B, most recent closing price at $88.28. Philip Morris dropped after its earnings failed to impress. Shares offer a 3.85% yield.

6. PPG Industries Inc. (PPG, Earnings, Analysts, Financials): Manufactures and supplies protective and decorative coatings. Market cap at $17.73B, most recent closing price at $116.12.

7. AutoZone Inc. (AZO, Earnings, Analysts, Financials): Operates as a specialty retailer and distributor of automotive replacement parts and accessories. Market cap at $13.69B, most recent closing price at $370.75. AutoZone said in September that it was buying back 5.5% of outstanding shares. Since 1998, the company bought back $12.7 billion of its own shares.

8. SLM Corporation (SLM, Earnings, Analysts, Financials): Provides education finance in the United States. Market cap at $8.21B, most recent closing price at $17.49.

9. CIENA Corp. (CIEN, Earnings, Analysts, Financials): Provides communications networking equipment, software, and services that support the transport, switching, aggregation, and management of voice, video, and data traffic. Market cap at $1.3B, most recent closing price at $12.94. Ciena is a networking equipment/component company. Shares declined recently after Juniper (JNPR) provided soft guidance for its next quarter. The 100G optical gear is a product that could support future growth, but only makes up 6% of sales. In August, Ciena warned that new design wins would be slower.

10. Navistar International Corporation (NAV, Earnings, Analysts, Financials): Through its subsidiaries, manufactures and sells commercial and military trucks, buses, diesel engines, recreational vehicles (RVs), and chassis, as well as provides service parts for trucks and trailers. Market cap at $1.47B, most recent closing price at $18.51. Navistar International is selling 10 million shares of its common stock. The company agreed to appoint a managing direct from Carl Icahn’s Icahn Partners earlier this month.

Written by Chris Lau. To interact and discuss these picks or picks of your own with users, attach your watch list or portfolio in a message to your friends on Kapitall. To connect with users on the leaderboard: from your tool bar, select Get Connected -> Top Kaptallists.

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