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When considering stocks, company debt is always important to keep in mind because debt is a wedge between firm value and the firm’s value to shareholders. When company debt reaches high levels, it diverts money away from shareholders (away from dividends) and towards higher interest payments. High debt also reduces the firm’s financial flexibility.

We ran a screen on low-debt stocks, with last year EBITDA (earnings before interest, taxes, depreciation, and amortization) greater than total debt. We screened these companies for those trading at steep discounts to target price, possibly indicating that they are undervalued. Finally, we screened for stocks seeing significant net insider buying over the last six months.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.



We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.



List sorted by net insider purchases as a percent of share float.

1. Visteon Corp. (NYSE:VC): Auto Parts Industry. Market cap of $3.46B. Last year EBITDA at $1.56B vs. last year total debt at $561.00M. Average analyst estimated target price at $82.00 (vs. current price at $67.82, a potential upside of 20.91%). Net insider purchases over the last 6 months at 1.77M, which is 4.45% of the company's share float.

2. Echo Global Logistics, Inc. (NASDAQ:ECHO): Trucking Industry. Market cap of $345.01M. Last year EBITDA at $20.39M vs. last year total debt at $0.42M. Average analyst estimated target price at $20.17 (vs. current price at $15.59, a potential upside of 29.36%). Net insider purchases over the last 6 months at 202.26K, which is 1.88% of the company's share float. The stock is a short squeeze candidate, with a short float at 22.12% (equivalent to 22.05 days of average volume). The stock has gained 37.12% over the last year.

3. Take-Two Interactive Software Inc. (NASDAQ:TTWO): Multimedia & Graphics Software Industry. Market cap of $1.22B. Last year EBITDA at $1.57B vs. last year total debt at $107.24M. Average analyst estimated target price at $18.99 (vs. current price at $14.07, a potential upside of 34.99%). Net insider purchases over the last 6 months at 458.75K, which is 0.58% of the company's share float. The stock has gained 32.86% over the last year.

4. Energy Partners Ltd. (NYSE:EPL):
Independent Oil & Gas Industry. Market cap of $696.64M. Last year EBITDA at $106.24M vs. last year total debt at $0.00M. Average analyst estimated target price at $21.65 (vs. current price at $17.39, a potential upside of 24.52%). Net insider purchases over the last 6 months at 200.00K, which is 0.56% of the company's share float. The stock is a short squeeze candidate, with a short float at 9.24% (equivalent to 11.55 days of average volume). The stock has had a good month, gaining 23.07%.

5. Rex Energy Corporation (NASDAQ:REXX): Oil & Gas Drilling & Exploration Industry. Market cap of $515.44M. Last year EBITDA at $10.74M vs. last year total debt at $10.12M. Average analyst estimated target price at $15.65 (vs. current price at $11.63, a potential upside of 34.60%). Net insider purchases over the last 6 months at 77.33K, which is 0.22% of the company's share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.61). The stock is a short squeeze candidate, with a short float at 33.31% (equivalent to 14.28 days of average volume). The stock has had a good month, gaining 17.12%.

Insider data sourced from Yahoo Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 5 Low-Debt Stocks Highly Undervalued, Being Bought by Insiders