Five companies have been identified as having both high profitability and low debt, making them strong candidates for investment consideration. Graco Inc., based in Minneapolis, has a return on equity of 23% with only 2% debt. A.O. Smith Corp., located in Milwaukee, has a 31% return on equity and debt at 8% of equity. Mueller Industries Inc., in Tennessee, has a return on equity of 25% and debt at only 1% of equity. Warrior Met Coal Inc., based in Alabama, has a return on equity of 29% and debt at 9% of equity. Axcelis Technologies Inc., in Massachusetts, has a return on equity of 31% with debt at 5% of equity.
Over the past 30 years, A.O. Smith Corp has been consistently profitable, showing an average profit growth of 12% per year in the past decade. Graco Inc. has been in operation since 1926, originally founded by Russell Gray, and went public in 1969. Mueller Industries Inc, which makes metal and plastic fittings, has reported a profit every year for the past 30 years. Warrior Met Coal Inc. was founded in 2015 after taking over assets from bankrupt Walter Energy Inc. Axcelis Technologies Inc. makes semiconductor chip equipment and has experienced significant earnings growth in the past five years.
The ongoing success of these companies in maintaining high profitability while keeping debt low is a testament to their strong financial management and operational efficiency. Investors looking to add stable and potentially lucrative stocks to their portfolios may want to consider these companies. Despite the solid performance of these companies, they are still trading at reasonable valuations in the market, offering potential for further growth.
Overall, the writer has identified 19 such companies since 2000, with an average 12-month return of 11.3% on his selections, narrowly outperforming the S&P 500 Total Return Index over the same periods. Thirteen out of the 19 columns have shown a profit, with 10 of them beating the benchmark index. It is important to note that past performance is not indicative of future results and investors should conduct their own research before making any investment decisions.
In the previous year, the writer highlighted five stocks meeting these criteria, with Mueller Industries Inc. delivering the best return at 38%. Cal-Maine Foods also had a strong return at 26%, while Diodes Inc. saw a decline of 23%. Moderna Inc. returned 17% and Civitas Resources Inc. was up 4%. In comparison, the S&P 500 Total Return Index outperformed the picks at 23.0% return. The writer discloses his ownership of Warrior Met Coal in a hedge fund he manages, as well as owning Cal-Maine Foods personally and for most of his clients. Investors interested in companies with high profitability and low debt may find these recommendations helpful in making informed investment decisions.
