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business news5 Stocks With Abnormally High Debt-to-Capital Ratios Near 52-Week Highs
Avis and Charter are among the stocks that have the highest debt-to-capital ratios in the marketplace.
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Companies have a choice between using equity or debt when deciding on how to finance their operations. The higher the debt-to-capital ratio, the more debt the company carries relative to its equity. A high ratio is a warning sign to investors that the debts may inhibit the company and increase its risk of default in the future. When the ratio is unusually high, investors should be extremely wary.
These five stocks are near their 52-week highs and have the amongst the highest debt-to-capital ratios in the marketplace:
1. Avis Budget Group (CAR): Avis has a debt-to-capital ratio of 94.48%, making it one of the most highly leveraged companies in the rental industry. The industry average is 71.21%. The company has one of the highest interest coverage ratios in the industry, but does not earn enough on a day-to-day basis to service the debt. Shares are currently trading at $18.18, just below their 52-week high of $18.75.
2. Charter Communications (CHTR): Charter has a debt-to-capital ratio of 89.28%. Although debt-to-capital ratios tend to be high in the broadcasting industry, Charter's is still above the industry average of 51.8%. A big red flag for this company lies in its interest coverage ratio, which is a meager 1.0. The industry average is 7.5. This indicates that the company may have serious problems servicing its debt in the future. Shares are currently trading at $54.36, just below their 52-week high of $55.80.
3. Annaly Capital Management (NLY): Annaly has a debt-to-capital ratio of 87%, making it one of the most leveraged companies real estate industry. The industry average is 53.4%. A high amount of leverage in the real estate industry is especially worrisome given the fragile state of the market. Shares are currently trading at $17.31, slightly below their 52-week high of $17.63.4. Elan (ELN): Elan has a debt-to-capital ratio of 86.7%, which makes it one of the most leveraged companies in the biotech industry. The industry average is 31.8%. Although the company does not earn enough from daily operations to fully service its debt, the company has significant cash on its balance sheet to fulfill its current debt obligations. The stock is currently trading at a new 52-week high of $8.31.
5. Liberty Global (LBTYA): Liberty has a debt-to-capital ratio of 86.7%. Once again, debt-to-capital ratios tend to be higher in the broadcasting industry, but Liberty is above the industry average of 51.8%. The company does not earn enough on a day-to-day basis to service its debt. On the bright side, it does have one of the highest interest coverage ratios in the industry. Shares are currently trading at $44.23, just below their 52-week high of $44.32.
Editor's Note: This content was originally published on Benzinga.com by Benjamin Lee.
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