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.
FirstService operates in the highly cyclical real estate industry, which adds risk. However, it’s a market leader and continues to make savvy acquisitions. That helps it attract and retain clients during economic slowdowns.
The firm remains one of our top picks as the stock trades at… Read More
Here’s a stock tip: Successful investing in mining stocks, especially jr mining stocks, can be hard, especially in 2024 given volatile commodity prices. Still, the following 20 tips should help guide you to top miners regardless
When investing in mining stocks, you’ll find that they can… 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
PROCTER & GAMBLE CO., $155.33, New York symbol PG, is a buy.
The company is one of the world’s largest makers of household and personal-care goods. Major brands include Tide (laundry detergent), Pampers (diapers), Gillette (razors), Crest (toothpaste) and Vicks (cold remedies).
Procter will now raise your quarterly… Read More
TC ENERGY INC., $49.73, Toronto symbol TRP, remains a buy.
TC generates steady cash flow for investors mainly through a 93,600-kilometre pipeline network that pumps natural gas from Alberta to eastern Canada and the U.S. Its other operations include 4,900 kilometres of crude oil pipelines and nine… 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 1,829.4% gain since we first recommended it in April 1995. That gain dramatically outpaced the 430.9% rise for… Read More
ROYAL BANK OF CANADA, $139.11, Toronto symbol RY, is a buy.
The bank last raised your quarterly dividend with the February 2024 payment. Investors now receive $1.38 a share, up 2.2% from $1.35. The new annual rate of $5.52 yields 4.0%.
Royal has now completed its $13.5-billion… Read More
CONAGRA BRANDS INC., $31.09, New York symbol CAG, is still a buy.
Through your shares, you tap the maker of some of North America’s most popular food brands. They include Chef Boyardee canned pasta, Hunt’s tomato sauce, Birds Eye frozen meals, Orville Redenbacher popcorn and Reddi-wip… Read More
CGI INC., $144.84, Toronto symbol GIB.A, is your #1 Aggressive Buy for 2024.
The company is Canada’s largest provider of computer outsourcing services. It helps its clients automate certain routine functions like accounting and buying supplies. That makes companies more efficient and lets them focus on… Read More
J.P. MORGAN CHASE & CO., $200.30, New York symbol JPM, is a buy.
Morgan is the largest banking firm in the U.S., with total assets of $3.89 trillion as of December 31, 2023.
With the April 2024 payment, Morgan will increase your quarterly dividend by 9.5%, to $1.15… 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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