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Screening out high debt companies
Old 06-28-2011, 08:34 AM   #1
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Screening out high debt companies

Anybody has ideas for how to screen out dangerously indebted companies, either in one of the online stock screeners or looking in the company statements?
What I would really love to find is a method that applies to all industries.
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Old 06-28-2011, 10:55 AM   #2
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Almost all online brokerages provide some basic research tools about a company, usually including debt ratios.
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Old 06-28-2011, 11:10 AM   #3
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You can use a Morningstar (M*) tool available (for preimum subscribers) to give you a lot of different analysis criteria, against all companies.

For instance, their debt/equity report can do an analysis against latest quarter, and 1-5 year periods.

However, just because a company currently carries a lot of debt does not mean that it should not merit consideration. Some companies/industries do require a lot of investment for current/future opportunies.

Here's an article that talks about this situation:

Company Valuation Methods - Debt Evaluation Formulas
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Old 06-28-2011, 11:33 AM   #4
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Back in the tech crash I used to screen on companies with less than 30% debt to equity. Looks like the Fidelity.com screener can search on "debt to capital" for you at no cost.
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Old 06-28-2011, 12:07 PM   #5
Confused about dryer sheets
 
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Quote:
Originally Posted by rescueme View Post
Here's an article that talks about this situation:

Company Valuation Methods - Debt Evaluation Formulas
Interesting article, it says that:
Interest Coverage = EBITDA / Interest Expense
should be at least 1.5
I like that it doesn't rely on the Balance Sheets.

It also says that EBITDA is before any accounting conventions are made.

I'm going to look if I can input this stuff in a screener!
Thanks rescueme!
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