While many numbers and statistics frequently prove to be of limited value in judging stocks, there is one that is often undervalued: market cap.
Instead of focusing on debt-to-equity [link to debt to equity tag page M6W1] financial ratios exclusively, we recommend that you also look at the ratio between a company’s debt and its market capitalization or “market cap” (the value of all shares the company has outstanding).
Like shareholders’ equity, market cap may differ widely from the net value of a company’s assets. However, a moderate debt-to-market-cap ratio will tend to provide a conservative starting point for analyzing a company’s chances of survival.
A great example is Coca-Cola Co. (symbol KO on New York). The company has long-term debt of $12.7 billion, which represents a moderately high 39% of its $32.6-billion shareholders’ equity. But that debt is just 8.1% of its market cap.
The difference reflects the fact that the company’s balance sheet doesn’t show the true value of its most valuable asset — its so-called intellectual property. In Coke’s case, one key asset is the secret formula for Coca-Cola, which is reputedly carried on the company’s books at one dollar. More important, the Coke brand name carries no value on the company’s balance sheet. However, these are reflected in its huge market cap of $157.2 billion. So, put into perspective, the company’s debt is very low.
We encourage investors to learn about market cap and invest in blue chip stocks like Coca-Cola, TSI Network recommends using our three-part Successful Investor philosophy:
Most investors who successfully build wealth over the long term follow certain investing practices. Find out what they are in our FREE investing guide, The 10 Best Practices of Successful Investors.
MICROSOFT CORP., $435.16, Nasdaq symbol MSFT, remains a buy for aggressive investors.
The company is the world’s largest computer software firm. Its main product is the Windows operating system, which powers about 85% of the world’s personal computers. Its other main product—its Office suite, with its… Read More
BCE INC., $47.56, Toronto symbol BCE, remains your #1 Income Buy for 2024.
The company is Canada’s largest traditional telephone service provider. It has 1.92 million residential customers in Ontario, Quebec, Manitoba and the Atlantic provinces. It also has 4.52 million high-speed Internet users and 2.12… Read More
A Member of Pat McKeough’s Inner Circle recently asked for his advice on a mining company that produces both copper and gold from operations in Brazil.
Pat likes the prospects of higher copper prices and the firm appears to be a capable miner. However, he also… Read More
On June 22, 2017, Brookfield Asset Management Inc. (now Brookfield Corp.) spun off its specialty insurance business as Trisura Group.
Today this specialty insurer is a sterling example of why we love spinoffs and the power they have to outperform their competitors. We first recommended this firm… Read More
VERIZON COMMUNICATIONS INC., $44.43, New York symbol VZ, is a buy.
The telecom provider is the second-largest wireless carrier in the U.S. after AT&T, with 114.2 million consumer cellphone subscribers. It also sells traditional telephone lines, high-speed Internet and TV services.
With the November 2024 payment, Verizon… Read More
VERIZON COMMUNICATIONS INC., $41.15, New York symbol VZ, is a buy.
The telecom provider is the second-largest wireless carrier in the U.S. after AT&T, with 114.2 million consumer cellphone subscribers. It also sells traditional telephone lines, high-speed Internet and TV services.
This week, the company agreed to… Read More
A: Calibre Mining Corp., $2.22, symbol CXB on Toronto (Shares outstanding: 789.2 million; Market cap: $1.8 billion; www.calibremining.com), is a mid-tier gold producer.
In January 2024, Calibre acquired Marathon Gold for about $345 million (Cdn.). Calibre now owns 100% interest of Marathon’s advanced-stage Valentine gold project… Read More
Learning which penny stocks to invest in should lead you to pennies with strong management focused on developing a saleable product or service, rather than hyping their story
Top-quality stocks tend to lose less of their value in the kind of severe market setback we’re experiencing… Read More
Royal Bank of Canada is celebrated as a conservative, blue-chip stock offering a dependable dividend yield.
But there’s more. It has also returned our investors a massive 2,052.3% gain since we first recommended it in April 1995. That gain dramatically outpaced the 456.9% rise for… Read More
When investing in mining stocks, you’ll find that they can be broken down into two categories, majors and junior mining stocks. Majors, the kind we focus on for our portfolio management clients, are typically mining companies that have been in the business for many years… Read More
Learn everything you need to know in 'The Canadian Guide on How to Invest in Stocks Successfully' FREE Special Report from The Successful Investor.
How to Invest In Stocks Guide: Find 10 factors that make your investments safer and stronger.
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