Our picks of debt free companies in the ASX

What if I told you I could give you 10 companies to invest in which has no debt? What if I told you I could give you a list of 10 debt free shares that has earnings and low net gearing.

Now that’s something that I could definitely do, give you a list of 3 stock market trading companies with no debt but still making earnings. The reason I specifically mentions earnings is because a company with no debt, yet no earnings is not such a great pick. This post is a follow up post from our last post – what stock to buy in corona-virus times

facebook stockmarket group

Recently I was in a Facebook stock trading group and I came across this question by a group member “what the debt free companies in ASX” – obviously to invest in these extraordinary times of bushfire, virus and economic market volatility.

There were many willing to give free advice on their own pick, I decided to check every stock mentioned in that group chat and managed to come back with only three that were totally debt free now and still had earnings.

debt free sticky

[ as you can see from those striked through , many did not make the mark for debt free companies, they were two sticky notes ]

Factors looked into for this research

1. Sales Trend / Cash flow / Earnings

2. Shareholders equity / Market capitalisation

3.  Net Gearing (%)

4. Return on equity / return on capital

The companies listed below has no long-term debt and some earnings history with low to no negative gearing ratio (as of 25/03/2020).

Here is the list of debt free companies.

1.

ASX: CDA

Codan Limited – $4.59

codan cdaasx new

https://codan.com.au/

Codan Limited is a manufacturer and supplier of communications, metal detection, and mining technology, headquartered in Adelaide, South Australia with revenue of A$132.3 million. In 2017, revenue was A$226.1 million.

codan CDA asx

Per share – Sales ($)

sales CDA

Capitalisation – Long-Term Debt (m)

cda long term debt

Leverage- Net gearing (%)

cda asx net gearing ratio

 

2.

ASX: A2M

A2 Milk Company Ltd – $15.90

a2 milk company asx

https://thea2milkcompany.com/

The a2 Milk Company Limited is an ASX 200 public listed company that commercialises intellectual property relating to A1 protein-free milk that is sold under the a2 and a2 MILK brands, as well as the milk and related products like infant formula.

Among these top 4 A2m has some long term debt , which is reasonably covered by  massive shareholder equity , market capitalisation,  revenue coming in and low gearing.

 

3.

ASX: EML

EML Payments Ltd – $1.445

emlasx tech company

https://www.emlpayments.com/

EML is a  Payment solutions provider

 

4.

ASX: ZIM

Zimplats Holdings Ltd – $7.80

zimplats

http://www.zimplats.com

ZIMPLATS HOLDINGS LIMITED (ZIM) is a company within the Metals & Mining sector listed in the ASX indicies. explores for and produces platinum group metals in Zimbabwe.

Zimplats Holdings Limited (ZIM) is a company registered in Guernsey. The company is a subsidiary (87% shareholding) of the South African based and listed Impala Platinum Holdings Limited (Implats).

While this company looks squeaky clean with the whole no debt and good returns,  low gearing and being registered in Guernsey, I  really don’t know what to make of it.

 

Here are some explanations of terms that I have looked at while doing research on these stocks,  before I came to the above and below listing of stocks.

Net gearing

A measure of how much debt a company has as a proportion of shareholders’ equity, also known as its financial leverage. The higher a company’s net gearing, the more vulnerable it would be in the event of a slowdown in cash flow and earnings because it would still need to service its debts.

If a company’s cash exceeds its debt, its net gearing will be negative.

Return on equity

Return on equity measures how well a company is generating profit using the money shareholders have invested. In general, a falling ROE can be a bad sign.  However, some industries are naturally inclined to have a higher ROE than others so ROE is best used to compare companies that operate in the same industry.

 

Below are some companies that are not totally debt free, but with low long-term debt.

Factors like net gearing ratios compared to return on equity and capital and long-term debt compared to shareholders equity and market capitalisation has been taken into consideration. These factors have been researched and taken to confirm their stability in volatile trading times

 

Downer EDI Limited

ASX: DOW – $2.77

downer group

Downer Group is an integrated services company active in Australia and New Zealand. Listed on the Australian Securities Exchange and New Zealand Stock Exchange as Downer EDI, Downer is an ASX 100 company that also owns 88 per cent of Spotless Group Holdings

 

Fortescue Metals Group Limited

ASX: FMG – $10.22

fortescue metals fmgasx

http://www.fmgl.com.au/

Fortescue Metals Group Ltd is an Australian iron ore company. Fortescue is the fourth largest iron ore producer in the world after BHP Billiton, Rio Tinto, and Vale.

 

Evolution Mining Ltd

ASX: EVN – $4.39

evolutions mining asx company

http://www.evolutionmining.com.au/

Evolution Mining (ASX:EVN) formerly Catalpa Resources has two gold assets, a 100% interest in the 100000 ounce per annum Edna May Gold Operation.. EVOLUTION MINING LIMITED (EVN) is a company within the Metals & Mining sector listed in the ASX indicies

Nearmap Ltd

ASX: NEA -$0.89

nearmap.asx stock market australia prices

https://www.nearmap.com/us/en

Nearmap Limited is an Australian aerial imagery technology and location data company that provides frequently-updated, high-resolution aerial imagery of 88% of Australia’s population, 68% of the United States population, and 72% of the New Zealand population.

 

OZ Minerals Limited

ASX: OZL – $6.98

OZ Minerals is a modern mining company based in Adelaide, Australia. It was originally formed after the merger of Oxiana Limited and Zinifex in 2008.

In 2009, Chinese state-owned China Minmetals proposed a purchase of the heavily indebted company.

 

Viva Energy REIT Ltd (ASX: VVR)

Viva energy is an ASX 200 stock that owns and leases out Shell branded service stations. These service stations are typically operated by Wesfarmers Ltd (ASX: WES) as Coles Express stations.

Some write ups on Viva:

Electro Optic Systems Hldg Ltd

ASX: EOS – $3.50

http://www.eos-aus.com/

Electro Optic Systems is a leading ASX listed Australian owned Defence and Space company.

 

Regis Resources Limited

ASX: RRL – $4.01

http://www.regisresources.com.au/

REGIS RESOURCES LIMITED (RRL) is a company within the Metals & Mining sector listed in the ASX indices

A few more good companies with low debt,  and meets other  qualifying criteria

ALU.ASX – ALTIUM

No long term debt. Sales and earnings rising. only factor that stood out was gearing was listed  @ –43.60 percent while having a market capitalisation of 4,463.00 (m)

  • S32.ASX
  • BRG.ASX

Some of the other companies  that got striked out in my second sticky note was

PME.ASX

BTH.ASX

STX.ASX

BRV.ASX

BM.ASX

LTR.ASX

PIO.ASX

IMU.ASX

AD8.ASX

So far I have scanned 40 companies financial statements  to come to the above picks.

I plan  to expand this list and  scan some more popular picks in the stock market,  to see if they meet our no debt or low debt screeners- so that I can add to this list.

Do check our previous post about stocks to buy in current volatility due to corona virus  post

Feel free to leave a comment.

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