Many responsible and successful companies utilize debt to fund growth when the right opportunities arise. After all, cash facilitates growth and innovation. But there are times when earnings are less than anticipated, and the debt becomes untenable. When paying off debt becomes the priority, a company may be faced with decisions that compromise growth strategies. With this idea in mind, we ran a screen to find large cap stocks that are relatively debt free. In addition, we narrowed our search to only include those that received 'Buy' ratings from industry analysts. We came up with a solid list of companies for you investigate.
The Debt/Equity Ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.
We first looked for large cap stocks. Next, we then screened for businesses that analysts rate as "Buy" (2 < mean recommendation < 3). Next, we then screened for businesses that operate with little to no debt (D/E Ratio<.1). We did not screen out any sectors.
Do you think these large-cap stocks should have higher valuations? Use our screened list as a starting point for your own analysis.
1) Automatic Data Processing, Inc. (ADP)
|Industry||Business Software & Services|
Automatic Data Processing, Inc. provides business outsourcing solutions. The company operates in three segments: Employer Services, Professional Employer Organization (PEO) Services, and Dealer Services. The Employer Services segment offers a range of human resource (HR) information, payroll processing, time and labor management, and tax and benefits administration solutions and services, including traditional and Web-based outsourcing solutions to employers in the United States, Canada, Europe, South America, Australia, and Asia. Its solutions assist employers to recruit, staff, manage, pay, and retain their employees. The PEO Services segment provides employment administration outsourcing solutions comprising payroll, payroll tax filing, HR guidance, 401(k) plan administration, benefits administration, compliance services, health and workers' compensation coverage, and other supplemental benefits for employees. The Dealer Services segment offers integrated dealer management systems, digital marketing solutions, and other business management solutions to auto, truck, motorcycle, marine, recreational vehicle, and heavy equipment retailers in North America, Europe, South Africa, the Middle East, and the Asia Pacific region. It also provides integrated applications for various department and functional areas of the dealership, such as customer relationship management applications, front-end sales and marketing solutions, and IP telephony phone systems; and computer hardware, hardware maintenance services, software support, system design, and network consulting services to its dealership clients, as well as designs, establishes, and maintains communications networks. In addition, this segment offers digital marketing solutions and services, including Websites, sales leads, email, search, display, and social media marketing and management services to the automotive industry. The company was founded in 1949 and is headquartered in Roseland, New Jersey.
2) Murphy Oil Corporation (MUR)
|Industry||Oil & Gas Refining & Marketing|
Murphy Oil Corporation, through its subsidiaries, engages in the exploration and production of oil and gas properties worldwide. It explores for and produces crude oil, natural gas, and natural gas liquids. The company is also involved in refining and marketing crude oil and other feedstock into petroleum products, such as gasoline and distillates; buying and selling crude oil and refined products; and transporting and marketing petroleum products. It markets its refined products through a network of retail gasoline stations and unbranded wholesale customers. As of December 31, 2011, the company marketed products through 1,128 Murphy-owned and operated stations. It has an interest in a Canadian synthetic oil operation; owns two ethanol production facilities in the United States; and one refinery in the United Kingdom. The company was formerly known as Murphy Corporation and changed its name to Murphy Oil Corporation in 1964. Murphy Oil Corporation was founded in 1950 and is headquartered in El Dorado, Arkansas.
3) Ralph Lauren Corporation (RL)
|Industry||Textile - Apparel Clothing|
Ralph Lauren Corporation engages in the design, marketing, and distribution of lifestyle products. It offers apparel products, including a range of men's, women's, and children's clothing; accessories comprising footwear, eyewear, watches, fine jewelry, hats, belts, and leather goods, such as handbags and luggage; home products consisting of bedding and bath products, furniture, fabric and wallpaper, paint, tabletop and giftware; and fragrance products. The company sells its products primarily under Polo Ralph Lauren, Purple Label, Ralph Lauren Women's Collection, Black Label, Blue Label, Lauren by Ralph Lauren, RRL, RLX Ralph Lauren, Denim & Supply Ralph Lauren, Rugby, Ralph Lauren, Ralph Lauren Childrenswear, American Living, Chaps, and Club Monaco brand names. Ralph Lauren Corporation sells its products through department stores, specialty stores, golf and pro shops, as well as company owned and licensed retail stores, and concessions-based shop-within-shops, and e-commerce Websites. The company also sells its apparel, home, and other products through licensing alliances. As of March 31, 2012, the company operated 379 retail stores, 474 concessions-based shop-within-shops, and 6 e-commerce Websites. It has operations in the Americas, Europe, and Asia. The company was formerly known as Polo Ralph Lauren Corporation and changed its name to Ralph Lauren Corporation in August 2011. Ralph Lauren Corporation was founded in 1967 and is based in New York, New York.
4) Citrix Systems, Inc. (CTXS)
|Industry||Business Software & Services|
Citrix Systems, Inc. designs, develops, and markets technology solutions to deliver IT services on-demand worldwide. It offers desktop solutions, such as XenDesktop, an integrated desktop virtualization system; XenApp, an application virtualization solution; AppDNA, an application migration software; VDI-in-a-Box, a desktop virtualization solution; and XenClient, a bare-metal hypervisor that runs on the client device hardware. The company also provides datacenter and cloud solutions, such as NetScaler, a Web application delivery controller; Branch Repeater for branch and mobile users; Access Gateway, an SSL/VPN that delivers applications with policy-based SmartAccess control; XenServer, a managed server virtualization platform; CloudStack to build cloud computing environments; CloudGateway, a unified service broker; CloudBridge, a network solution; and CloudPortal to automate business and operations support services. In addition, it offers software as a service products, such as GoToMeeting primarily for online meetings; GoToWebinar for Webinar sessions; GoToTraining to deliver content to trainees; Integrated Toll Free Audio to provide an audio and Web experience; and HiDef Corporate that offers audio options with reservationless audio conferencing. Further, the company offers GoToAssist, a remote technical-support solution; GoToManage solution for IT management; GoToMyPC, which offers remote access to PC and Mac from an Internet-connected computer; ShareFile, a data sharing and collaboration product; and consulting, technical support, and product training and certification services. Additionally, it provides data and video optimization solutions for mobile network operators. The company was formerly known as Citrus Systems, Inc. and changed its name to Citrix Systems, Inc. in March 2009. Citrix Systems was founded in 1989 and is headquartered in Fort Lauderdale, Florida.
5) LinkedIn Corporation (LNKD)
|Industry||Internet Information Providers|
LinkedIn Corporation operates an online professional network. The company, through its proprietary platform, allows members to create, manage, and share their professional identity online; build and engage with their professional networks; access shared knowledge and insights; and find business opportunities. Its platform also offers members with solutions, including applications and tools to search, connect, and communicate with business contacts, learn about career opportunities, join industry groups, research organizations, and share information. In addition, the company provides LinkedIn mobile applications across various platforms and languages, such as Android, Blackberry, iPad, and iPhone mobile devices; a public Website that allows developers to integrate its content and services into their applications; and a set of embeddable widgets to allow Web developers to include content from the company's network into their Website or application. Further, it offers hiring solutions comprising LinkedIn Corporate Solutions that enable enterprises and professional organizations to find, contact, and hire qualified candidates; LinkedIn Jobs that allow enterprises and professional organizations to advertise job opportunities on the company's network; and Subscriptions, which enable recruiters and hiring managers to find, contact, and manage potential candidates. Additionally, the company provides marketing solutions, such as LinkedIn Ads, a self-service platform that enable advertisers to build and target their advertisement to its members; and LinkedIn Ads for Enterprise, which are marketing solutions to target larger advertisers that receive dedicated account management and additional marketing solutions. It also offers premium subscriptions that are subscription packages designed for general professionals to manage their professional identity and connect with talent. LinkedIn Corporation was founded in 2002 and is headquartered in Mountain View, California.
6) VMware, Inc. (VMW)
|Industry||Technical & System Software|
VMware, Inc. provides virtualization and virtualization-based cloud infrastructure solutions in the United States and internationally. The company's products address planned and unplanned downtime management, system recoverability and reliability, backup and recovery, resource provisioning and management, capacity and performance management, and security issues. Its cloud infrastructure products and technologies include VMware vSphere, which is a data center platform that also enables live migration of actively running virtual machines across servers or storage locations without disruption or downtime; enables availability for all applications against hardware and operating system failures; and enables centralized point of control for cluster-level networking, as well as automatically manages the placement and balancing of a virtual machine across storage resources. The company also offers cloud application platform solutions that help organizations build, run, and manage enterprise applications in public, private, or hybrid clouds optimized for vSphere. In addition, it provides end-user computing solutions, which provide secure access to applications and data from various devices and location, as well as serves the corporate IT departments through managing and connecting end-user assets delivering them as a managed service. The company's end-user computing solutions also provide the ability to manage software as a service, Windows, Mobile, or enterprise applications, as well as enhance communication and collaboration between end users. Further, it provides a range of professional services, such as consulting, education, and technical account manager services, as well as customer support services. The company sells its products through distributors, resellers, system vendors, and systems integrators. VMware, Inc. was incorporated in 1998 and is headquartered in Palo Alto, California. VMware, Inc. operates as a subsidiary of EMC Corporation.
7) ARM Holdings plc (ARMH)
|Industry||Semiconductor - Specialized|
ARM Holdings plc designs reduced instruction set computing (RISC) microprocessors, physical intellectual property, and related technology and software. Its products and services include 16/32-bit RISC microprocessors cores, data engines, graphics intellectual property, and on-chip fabric intellectual property; embedded software; physical intellectual property; development tools; and consulting, support, and maintenance services. The company licenses and sells its technology and products to electronics companies, which in turn manufacture, market, and sell microprocessors, application-specific integrated circuits, and application-specific standard processors to systems companies for incorporation into various end products. ARM Holdings is establishing RISC processor architecture and physical intellectual property for use in various high-volume embedded microprocessor applications, including digital cellular phones, modems, and automotive functions, as well as in smart cards and digital video. It offers its products and services in Europe, the United States, and the Asia Pacific. The company was founded in 1990 as Advanced RISC Machines Holdings Limited and changed its name to ARM Holdings plc in 1998. ARM Holdings is based in Cambridge, the United Kingdom.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/27/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.