A household with high debt doesn’t need to teeter on the edge of bankruptcy to feel uncomfortable. They may have to skip the vacation to Mexico they had planned, or need to sell the antique table they got from Aunt Florence.
Companies with high debt are in a similar bind. They may miss a great acquisition opportunity, or have to sell a promising division. Low-debt companies have many strategic options, high-debt companies have fewer.
Every May, I recommend a few stocks that have low debt or none at all. Over 23 years, the average return on my low-debt recommendations has been 23.5%. That’s well above the 11.9% average for the Standard & Poor’s 500 Total Return Index.
Bear in mind that my column results are hypothetical and shouldn’t be confused with results I obtain for clients. Also, past performance doesn’t predict the future.
Here are five low-debt companies whose stocks look enticing to me now. I’m repeating two of my recommendations from a year ago — Cal-Maine Foods Inc. (CALM) and Monarch Cement Co. (MCEM)
First Solar
The largest manufacturer of solar panels in the U.S., First Solar Inc. (FSLR) has debt equal to only 7% of the company’s equity (corporate net worth). While the Biden administration was enthusiastically pro-solar, the Trump administration prefers oil and gas.
Many of the subsidies that helped solar energy have been cut or eliminated. So, it’s not surprising that First Solar shares sell for slightly less than they did three years ago.
The company is still growing, though. Revenue was up an average of almost 14% a year in the past five years, and 24% in the past year.
Cal-Maine
Based in Ridgeland, Miss., Cal-Maine Foods is the largest U.S. egg producer. Americans eat about 220 to 204 eggs a year. A dream scenario for Cal-Maine would have that figure climb toward the 1945 high, about 400 eggs a year.
For now, Cal-Maine stock sells for a rock-bottom multiple — five times recent earnings. That’s because analysts expect earnings to plunge. They think 2025 was the peak for egg prices, as avian flu reduced the egg supply last year.
Egg prices have fallen quite a lot, but Cal-Maine shares have held their own, partly because the company is emphasizing specialty eggs and prepared food.
Cal-Maine is debt-free.
Gentex
Gentex Corp., out of Zeeland, Mich., makes glare-control mirrors for cars, including mirrors that alert drivers when someone is in their blind spot. The stock has lost about a third of its value in the past five years, even as earnings have risen about 6% a year. The company is debt-free.
Gentex shares go for about 18 times recent earnings, but only 12 times analysts’ estimate of earnings for the next four quarters. Only nine analysts follow the stock, and only four of them recommend it. I’m with the minority.
Monarch Cement
Another debt-free stock is Monarch Cement, based in Humboldt, Kan. The stock is thinly traded and partially owned by the fifth generation of the founding Wulf family. In addition to its home state of Kansas, it sells concrete in Arkansas, Iowa, Missouri, Nebraska and Oklahoma.
The stock has more than doubled in the past three years, and sells for about 18 times earnings. Traded on the pink sheets, not on any exchange, this stock is completely neglected by Wall Street.
EverQuote
Based in Cambridge, Mass., EverQuote Inc. (EVER) is a small company that provides an online marketplace for insurance shopping. It went public in 2018 and had several years of losses before breaking into the black in 2024. Only eight analysts cover it; six of them recommend it.
One issue with EverQuote is that consumers report getting more solicitations after using its site. But it must be doing something right. Revenue rose 34% last year and earnings tripled. The stock sells for about six times earnings, a possible bargain. Debt is about 1% of equity.
Last Year
Of my 23 sets of low-debt recommendations, 15 have been profitable and 14 have beaten the S&P 500. Last year wasn’t one of the successes.
My picks from a year ago returned a paltry 1.7%, while the S&P zipped up 28.4%. I had losses in Cal-Maine Foods (down 13.9%), which I’m recommending again this year, and in Employers Holdings Inc. (EIG, down 10.4%).
Gentex Corp., Monarch Cement Co. and T. Rowe Price Group Inc. (TROW) all advanced, but none of them beat the surging S&P.
Disclosure: I own Cal-Maine personally and for almost all of my clients.