What Do Profitable, Unleveraged US Stocks Look Like?

By Jeffrey Cohen, President and Founder, US Advanced Computing Infrastructure, Inc.

We ran an analysis of the Chicago Quantum Net Score last night and only selected US companies that actively trade, have US-Listed Common Stocks that have a non-trivial Net Income, and a Debt/Income ratio that is ‘reasonable.’

It seems like a reasonable test. What if an investor choose companies that make a profit, and have low levels of debt?

We found a few results to share with you.

1. By requiring a ‘valid’ net income and debt value by our market data services provider, we lost about 75 companies that would have otherwise been considered for the list.
2. The profitability and debt level limitation eliminated the rest. In total, we went from around 3,000 stocks to around 800.

What do we know about the 800 US-listed, profitable stocks with low relative levels of debt?

1. They are large and valuable, with an average PE ratio of 20. The average equity market capitalization of the list, including any errors or anomalies, is $33.4B. It has $2.75B in total debt (not net of cash), and $1.7B in Net Income. That is a price to earnings, or PE ratio of around 20x. Seems normal, and even a bit pricey on average.
2. The average debt to net income ratio is around 1.5x, given where we set the maximum, so the average company in our list of around 800 could pay off their debt in two years…