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Financial leverage, which is also called the equity multiplier, shows a company’s total assets per dollar of stockholders' equity. The higher this ratio is the more heavily a company is relying on debt to finance its assets. A company that uses a very high level of financial leverage can expect increased volatility due to its capital structure.

The Net Profit Margin expresses how much of each dollar earned is left as a profit to the company. Companies that can expand their Net Margin over time are often considered to be favorable investments because this increased profitability should lead the stock price of the company higher.

We ran a screen for Consumer Defensive companies that have low Financial Leverage (X<2). From this narrowed pool we then screened for companies that had a Net Profit Margin of at least 5% or higher.

The Financial Leverage Ratio ranks the list from lowest to highest:

1. Ambev (ABV)

Sector

Consumer Defensive

Industry

Beverage-Brewers

Market Cap

$101,403M

Beta

0.99

The company produces and sells a variety of beers, alcoholic, and non-alcoholic beverages. The company’s Financial Leverage Ratio is 1.69. ABV’s Net Margin is 29.97%. The short interest was N/A as of 08/31/2011.

2. Mexican Economic Development (NYSE:FMX)

Sector

Consumer Defensive

Industry

Beverages-Wineries and Distilleries

Market Cap

$119,942M

Beta

1.25

This is a holding company that produces and sells alcoholic and non-alcoholic beverages. The Financial Leverage Ratio is 1.49. FMX’s Net Margin is 23.72%. The short interest was N/A as of 08/31/2011.

3. Brown-Forman Corp. (NYSE:BF.B)

Sector

Consumer Defensive

Industry

Beverages - Wineries & Distilleries

Market Cap

$ 9,797M

Beta

0.73

The company and sells a variety of alcoholic beverages. The Financial Leverage Ratio is 1.81. BF.B’s Net Margin is 22.12%. The short interest was 1.70% as of 08/31/2011.

4. Molson Coors Brewing Company (NYSE:TAP)

Sector

Consumer Defensive

Industry

Beverages - Brewers

Market Cap

$ 7,879M

Beta

0.73

This is a holding company that operates Coors Brewing Company and other subsidiaries. The Financial Leverage Ratio is 1.61. TAP’s Net Margin is 21.75%. The short interest was 2.30% as of 08/31/2011.

5. New Oriental Education & Tech (NYSE:EDU)

Sector

Consumer Defensive

Industry

Education & Training Services

Market Cap

$5,236M

Beta

0.78

The company offers private educational services in China. The Financial Leverage Ratio is 1.42. EDU’s Net Margin is 20.14%. The short interest was N/A as of 08/31/2011.

6. Bridgepoint Education, Inc. (NYSE:BPI)

Sector

Consumer Defensive

Industry

Education & Training Services

Market Cap

$1,101M

Beta

2.28


The company's Financial Leverage Ratio is 1.83. BPI’s Net Margin is 17.89%. The short interest was 74.50% as of 08/31/2011. Given the high short interest this could be a short favorite or potentially a great short squeeze.

7. Hansen Natural Corporation (HANS)

Sector

Consumer Defensive

Industry

Beverages - Soft Drinks

Market Cap

$ 7,830M

Beta

0.33


The company produces and sells a variety of non-alcoholic beverages. The Financial Leverage Ratio is 1.30. HANS’s Net Margin is 16.26%. The short interest was 1.70% as of 08/31/2011.

8. DeVry, Inc. (NYSE:DV)

Sector

Consumer Defensive

Industry

Education & Training Services

Market Cap

$ 2,752M

Beta

0.36


The company offers degree and career oriented educational services. The Financial Leverage Ratio is 1.33. DV’s Net Margin is 15.14%. The short interest was N/A as of 08/31/2011.

9. Capella Education Company (NASDAQ:CPLA)

Sector

Consumer Defensive

Industry

Education & Training Services

Market Cap

$504M

Beta

0.48


The company offers post-secondary education services online. The Financial Leverage Ratio is 1.29. CPLA’s Net Margin is 14.38%. The short interest was N/A as of 08/31/2011.

10. Boston Beer Company, Inc. (NYSE:SAM)

Sector

Consumer Defensive

Industry

Beverages - Brewers

Market Cap

$ 1,018M

Beta

0.82

The company produces and sells alcoholic beverages. The Financial Leverage Ratio is 1.57. SAM’s Net Margin is 10.81%. The short interest was 18.10% as of 08/31/2011. Given the high short interest this may be a short favorite or potentially a great short squeeze.

We hope this list helps investors as they do their own due diligence on Consumer Defensive firms with low Financial Leverage.



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

Source: 10 Consumer Defensive Stocks Holding Strong Margins That Aren't Playing With Leverage