A Comparison of Five Debt-Free and Five Debt-Laden Companies
-
Font Size:
I write about a very large number of stocks, and one of the the things I've been noticing is that many of the companies that have had problems have a large amount of debt. In addition, I keep seeing a large number of stocks that have been performing well are debt-free.
I decided to do a 'quick and dirty' analysis of debt-free companies versus companies with a lot of dept. To keep things fairly consistent, I searched for stocks with price to earnings ratios below 30 and price earnings to growth ratios below 2. I then did a random selection of five stocks from each group and looked at the year-to-date returns. This is what I came up with:
High Debt
Goldman Sachs (GS) 13.7% Morgan Stanley (MS) -21.1% Lehman Brothers (LEH) -19.6% Echostar (DISH) 12.3% SLM Corp. (SLM) -19.7% Average return -6.9%
Debt-Free
Microsoft (MSFT) 14.1% SAP (SAP) -2.5% Texas Instruments (TXN) 11.5% Nvidia (NVDA) 31.1% T. Rowe Price (TROW) 35.7% Average return 18.0%
Of course, there are companies like Apple Inc. (AAPL) which are debt-free, and has had a return of 117.4% year to date, but it wouldn't even be part of the pool of stocks to even randomly extract from, since its P/E of 46.35 is outside the original criteria of 30 or less.
Anyway, it looks like this analysis warrants further research.
Disclosure: The author owns MSFT, SAP, and AAPL.
Get Seeking Alpha Free Stock Alerts by Email!
Get Free Stock Alerts by Email!
-
Editor's Picks
-
Most Popular
- Ecolab: Strong Price Momentum and High Quality Financials
- Assurant Is A Compelling Short Sell
- Broadcom Enters FTTH Chipset Market
- Another Macroshares Oil Arbitrage Opportunity
- Freeport McMoran: With Copper Prices Rising, It's Still a Buy
- Oil and the Futures Market
- Full list of Editor's Picks »
- High Likelihood of a Market Crash »
- Time To Start Buying Some Dogs? »
- Sirius-XM Combination: A Future Microsoft Acquisition? »
- JP Morgan Offer for Wachovia Makes Sense »
- High-Yield Canadian Royalty Trusts: What's the Catch? »
- 7 Stocks I'm Buying Now »
- Adding to My GE Position »
- 7 Stocks for a High Yield Cash Flow Portfolio »
- Drybulk Shipping: Prepare for a New Record High »
- Nokia: Bargain of a Lifetime - Barron's »
- Top 10 Payout Yield Stocks »
-
Long Ideas
-
Short Ideas
-
Cramer's Picks
- Time Warner's Due for a Comeback - Barron's
- Pep Boys: Price Skid Presents Long Opportunity
- Spectra Energy: Gas Pipelines Make Great Recession Proof Stocks
- Barron's Drinks to Constellation
- Adding Wood to Your Portolio: A Worthwhile Investment
- Arkansas Steel: 10 Structural Changes That Should Trump the Business Cycle
- Gross Margin Drivers at Potash Corp. (Part II)
- A New Strategy for EXACT Sciences
- Cytori Therapeutics: The Stem Cell 'Celution' for Success
- LDK Solar: The Brightest Opportunity?
- Full list of Long Ideas »
- Crystal River’s Q2 Write-Downs Could Bankrupt the Company
- Assurant Is A Compelling Short Sell
- Fuel Systems Solutions: Time to Take Profits
- GM an Unlikely Hero - Fast Money Recap (7/1/08)
- Pair Trade Visa and Capital One
- Amazon's Kindle Numbers: All Fluff, Zero Substance
- A. Schulman: Cashless Profits
- Titan Machinery: Doesn't Anybody Look at Valuation?
- Goodrich Petroleum: Gas in the Ground Doesn't Mean Cash in the Bank
- Outlook Remains Grim for MBIA, Ambac
- Full list of Short Ideas »
- StanCorp a Safe Financial - Cramer's Lightning Round (7/2/08)
- Momentum Stocks Stalled - Cramer's Stop Trading! (7/3/08)
- Expecting a Lift for Pediatrix: Cramer's Mad Money (7/3/08)
- The Most Bullish Thing - Cramer's Stop Trading! (7/1/08)
- Exelon's Got Nukes - Cramer's Lightning Round (7/1/08)
- Prescription Prediction for Allscripts - Cramer's Mad Money (7/1/08)
- Rex Marks the Spot - Cramer's Lightning Round, (6/30/08)
- Medicare Bill Buys - Cramer's Mad Money (6/30/08)
- Cracker Bottom of the Barrel - Cramer's Lightning Round (6/27/08)
- Britannia Bulk Rules the Waves - Cramer's Mad Money (6/27/08)
- Full list of Cramers Picks »
Most Popular Feeds
-
ETFs
-
US Market
-
Long Ideas
-
Alt. Energy
- Full list of feeds »
Hedge Fund Jobs
Job Seekers:
- Search jobs by category
- Get job alerts by email or live feed
- Apply online
Employers
- See all recruitment options
- Get applications online or by email


