15 Debt-Free Companies With Healthy Cash Flows

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Includes: AAPL, AMZN, ATGE, BBBY, FFIV, FRX, TROW
by: Efsinvestment

Looking for a nice cash flow with no serious debt is the one of the best ways to determine the sustainability of a stock, as these two are among the crucial indicators. Therefore, CNBC just compiled a list of fifteen companies that own zero debt, along with healthy cash flows. Among this list, there are great stocks with tremendous balance sheets.

I divided my article into two to investigate all of them fairly. I have analyzed these stocks from a fundamental perspective, adding my FED+ valuations and O-Metrix scoring systems where applicable. Here is a brief analysis of the first seven stocks from the list “15 Companies with Zero Debt” (Data obtained from Finviz/Morningstar, and is current as of October 24 close. You can download the O-Metrix calculator, here.):

DeVry (DV) will announce its quarterly earnings on October 25. It has a P/E ratio of 9.9, and a forward P/E ratio of 10.0, as of October 24. Five-year annual EPS growth forecast is 13.2%, which sounds conservative given the 50.43% EPS growth of past five years. It pays a symbolic dividend of 0.52%, while the profit margin (15.1%) is way higher than the industry average of 8.1%.

Target price implies a 32.1% upside potential, whereas the stock is trading 33.93% lower than its 52-week high. O-Metrix score is 6.89, and DeVry returned 1.1% in a year. Yields are consistently growing, as well as assets. Beta value is 0.71. Debt-to equity ratio is 0.0, way below the industry average of 1.2. ROE is 25.72%, and institutions hold 88.93% of the shares. SMA20 and SMA50 are 7.35% and 7.26%, respectively. Cash flow is doing marvelous, whereas PEG value is 0.8. Consider adding this stock to your portfolio.

T. Rowe (NASDAQ:TROW) has increased its earnings by 9.7% in Q3 2011. The company shows a trailing P/E ratio of 19.6, and a forward P/E ratio of 17.2, as of the October 25 close. Analysts estimate an annualized EPS growth of 11.0% for the next five years. With a profit margin of 28.9%, it offers a 2.1% dividend.

T. Rowe returned -5.2% in a year, while it is currently trading 25.71% lower than its 52-week high. O-Metrix score is 3.55, and its target price indicates a 9.2% increase potential. Yields seem all right, whereas assets are increasing sharply since 2008. Earnings increased by 28.67% this quarter, and 53.28% this year. Debt-to equity ratio is 0.0, way lower than the industry average of 1.7. Gross margin and operating margin are 95.7% and 44.9%, respectively. While ROE is 23.85%, ROA is 20.86%. This is a nice stock to buy.

Although Apple (NASDAQ:AAPL) got hammered as Q3 earnings missed expectations, the stock seems to be healing itself. The California-based Apple was trading at a P/E ratio of 16.1, and a forward P/E ratio of 11.8, as of October 24. Estimated annual EPS growth is 18.4% for the next five years. It has no dividend policy, while the profit margin was 23.5% in 2010.

Apple is currently trading 5.75% lower than its 52-week high, whereas its target price implies an about 24.9% upside potential. O-Metrix score is 6.59, and it returned 30.1% in a year. Assets and cash flow are doing fabulous. Apple had an 82.63% EPS growth this year, and 51.99% this quarter. Operating margin is 30.4%. While ROE is 41.99%, ROA is 27.53%. PEG value is 0.6, while Morningstar gives a four-star rating to the company. My FED+ Fair-Value range is between $571.52 and $646.33 per share for Apple, which means that it has a great upside movement potential. (Read my updated analysis of Apple here).

Bed Bath & Beyond’s (NASDAQ:BBBY) insiders are selling large amounts of stocks currently. The retailer has a P/E ratio of 17.7, and a forward P/E ratio of 14.2, as of the October 24 close. Analysts expect the company to have a 14.5% annual EPS growth in the next five years. Profit margin (9.7%) more than doubles the industry average of 3.8%, and it offers no dividend.

Earnings increased by 33.05% this year, and 33.05% this quarter. Institutions hold 92.58% of the shares, while O-Metrix score is 4.54. Target price is $61.98, indicating a 0.4% upside movement potential. Bed Bath returned 39.8% in the last twelve months, whereas assets are doing tremendous. Debt-to equity ratio is 0.0, way below the industry average of 1.0. ROE is 22.92%, and PEG value is 1.0. I think the company is fairly-priced for 14.5% growth estimate.

Argus just downgraded Forest Labs (NYSE:FRX) from Buy to Hold. As of October 24, it shows a trailing P/E ratio of 7.7, and a forward P/E ratio of 27.3. Five-year annualized EPS growth forecast is 0.18%. Profit margin (26.4%) crushes the industry average of 10.5%, while it pays no dividend.

O-Metrix score of Forest Labs is 0.05, whereas it is currently trading 23.86% lower than its 52-week high. SMA50 and SMA200 are -4.88% and -9.48%, respectively. Target price indicates an about 17.0% increase potential, and it returned -8.9% in a year. Insiders hold only 0.78% of the shares, whereas earnings decreased by 8.30% this quarter. Average analysts recommendation for Forest Labs is 1.8 (1=Buy, 3=Sell). Insiders have been mostly selling stocks for a while. Analysts do not expect any EPS growth in the next five years. Moreover, the company lacks a dividend. I do not think it is not a good idea to invest in such stocks with zero growth expectations and no dividends.

Amazon (NASDAQ:AMZN) reported quarterly earnings which were way below analyst expectations. The company missed the Q3 EPS estimate by $0.1. The Washington-based Amazon was trading at a P/E ratio of 105.3, and a forward P/E ratio of 74.6, as of October 25. Estimated annual EPS growth for the next five years is 27.1%. With a thin profit margin of 2.6%, it offers no dividend.

Amazon is currently trading 6.17% lower than its 52-week high, while it returned 37.0% in the last twelve months. O-Metrix score is 1.50, and its target price indicates an about 4.5% upside movement potential. Beta value is 1.09, whereas earnings decreased by 8.73% this quarter. P/E ratio, P/B (13.9), and P/S (2.7) are solid red flags. Operating margin and gross margin are 3.1% and 22.4%, respectively. ROA is 6.84%. Amazon has a terrible PEG value of 2.8. The company is in my high-fliers list, so avoiding is the best bet. (Full analysis of Amazon, here.)

F5 Networks (NASDAQ:FFIV) announced its Q3 2011 earning results on October 25. EPS of $1.06 beat the analyst estimates by $0.08. The Washington-based tech stock shows a trailing P/E ratio of 34.4, and a forward P/E ratio of 21.7, as of the October 24 close. Analysts estimate an annual EPS growth of 18.6% for the next five years. With a profit margin of 20.3%, it has no dividend policy.

Target price is $101.40, which implies a 12.6% upside potential. The stock is currently trading 38.21% lower than its 52-week high, while it returned -10.8% in a year. Insiders own only 0.48% of the shares, and SMA200 is -10.15%. Beta value is 1.31. P/B is 6.5, and P/S is 7.0, both of which are way above their industry averages. Moreover, it has a two-star rating from Morningstar. Since mid-January, the stock has lost nearly 37.7%. I think F5 Networks is over-priced and I would not think of investing any money in such a stock.

Disclosure: I am long AAPL.