No Debt: 11 Big U.S. Companies Borrow Nothing (2024)

Rising corporate debt is another worry for investors to contend with, some money managers warn. Debt loads are a concern on top of trade wars with China. Those looking for a solution might want to look at the companies resisting the urge to borrow and have no debt.

X

There are 11 companies in the Standard & Poor's 500 that reported carrying no long-term debt. That's through the most recent quarter, according to an Investor's Business Daily analysis of data from S&P Global Markets Intelligence. And three of those stocks—Paccar (PCAR), PayPal (PYPL) and Ulta Beauty (ULTA)— receive IBD Composite Ratings of 90 or higher.

Rising Corporate Debt Worries Investors

A prolonged period of low interest rates has induced many companies to borrow. Nonfinancial debt levels as a percentage of GDP have reached all-time highs. That concern was raised by money managers at the2019 Morningstar Investment Conference. The worry is that a tougher economy or rising interest rates could make it more difficult for companies to service leverage.

Looking For Companies With No Debt

One way to avoid this concern is targeting companies that have not borrowed at all. A case in point is online payment service PayPal. The company has nearly $8 billion in cash and short-term investments on the balance sheet and no long-term debt. "As a spinoff from eBay in 2015, they already had a very large base of business, so didn't need debt to help build the franchise. They also operate in a low-capital-intensive business,"said Stephen Biggar, analyst at Argus Research. "Lastly, they have very high cash flow and can thus fund their own operations."

PayPal is well-extended from a 93.80 buy point. It could set up a new entry if it rebounds off the 10-week moving average. But all buys are at greater risk when the market uptrend is under pressure.

Another example of a highly rated IBD stock with no long-term debt is cosmetics seller Ulta. With its IBD Composite Rating of 93, the company is showing strength even with no leverage. Earnings have grown every year since at least 2011 and analysts are calling for an 18% earnings rise in 2020. Again, the stock is extended as it trades at 330.05, well above the 294.54 buy point.

List Of Debt-Free Companies

While debt is not an issue yet, it very well could become one. And that's why the management of some companies approach borrowing more conservatively. Medical device maker Abiomed (ABMD) has avoided debt, presumably, as there hasn't been an attractive reason to take it on. "The company has been a profitable, technological leader in innovating devices that treat heart failure for quite a while, which has likely given it room to breathe," said Kevin Huang, analyst at CFRA. "The company's CEO, Michael R. Minogue, has been with the company since 2004 and I imagine that he values maintaining little to no debt and has likely been influential in the keeping the company's capital structure debt-free."

Sources: IBD, S&P Global Markets Intelligence

YOU MIGHT ALSO LIKE:

Experts: Mounting Corporate Debt Could Cripple Stocks

10 Stocks Face Big Problem In Trump China Trade War, Including Large Cap Techs

Get Full Access To IBD Stock Lists And Ratings

Find Winning Stocks With Market Smith Pattern Recognition & Custom Screens