If you see past several years, you will note that the companies that have gone out of business are those which had a lot of debt on their financials. Being debt free is one of the many criterion investors use while selecting their next stock pick. These stocks are equally preferred by income investors who like to invest in high dividend yielding stocks (read my picks on dividend stocks here). While making their choice, invetsors should also take into consideration their performance in the longer horizon. Keeping this in mind, I have picked up three stocks that have zero debt on their balance sheets. Also, they hold good amounts of cash and liquid assets to fund their acquisitions and expansions. This strategy has helped them focus their funds on reinvestment activities that drive earnings growth. Let’s discuss these stocks in detail.
The IT services provider, Citrix Systems, Inc. (NASDAQ:CTXS) recently reported its 4Q12 results beating the analysts’ estimates. The revenue jumped by ~19% to ~$740 million on y/y basis, which is higher than the street estimate of ~$710 million. The highest contributor to the revenue was the license updates and maintenance which increased by ~22% from the last year. Talking about the regional performance, the pacific region stood out as a winner with a contribution of around 52% to the company’s total revenue. The company posted an EPS of ~$0.90 which again surpassed the average analyst’s estimate of ~$0.84.
Moving into 2013, the virtualization trends in the industry remain stable. Citrix is adapting a broader range of solutions in its portfolio to capitalize this opportunity. In its last quarter, the company launched its next phase for its project Avalon, which is the company’s initiative to provide Windows apps and desktops with a cloud service. In this phase, the company came up with two new releases Excalibur and Merlin. Excalibur will focus on various advancements to simplify the transition process of the mobile-cloud era of big enterprises. On the other hand, Merlin will be more into Windows as a cloud service with new upgrades and features. I remain optimistic with this move by the company and expect the benefits to flow from mid-2013. Moreover, the corporate adoption of Windows 7 and 8 would help in the success of project Avalon. I expect the growth in sales for XenDesktop for 2013 to be ~13% and the license growth for desktops to be around 7%. On the long-term basis, the earnings CAGR would be ~30% which provides a good investing opportunity.
Bed Bath & Beyond Inc. (NASDAQ:BBBY)
The specialty retailer posted its 3Q12 results with EPS and revenue ahead of the analyst predictions. Bed Bath reported EPS of $1.03 against the estimates of $1.02, which increased by ~8.4% from the last year. Similarly, the net sales for the quarter were ~$2.7 billion, up by ~15% y/y and higher than the estimate of ~$2.25 billion. However, the company’s comp store sales saw an increase of just ~1.7% as compared to the increase of ~4.1% in the last year’s same quarter. This was mainly due to the Hurricane Sandy which impacted the company’s sales in this quarter. However, on the whole net income moved up by ~23% y/y which surpassed the average increase of ~11% from the last five quarters.
From the last few years, the company has started facing stiff competition from the online channels. Bed Bath also has its own e-commerce segment but its online sales contribute just around 1% to its total sales. Therefore, the company has its plans to focus on its e-commerce platform and on maximizing its online sales. Bed Bath aims at upgrading its online portal as well as at setting up a new distribution and IT data center. These initiatives would increase the company’s capex in the short run with ~$300 million expected for FY12. However in the long run, these steps will start paying off which would provide an upside of ~5% to the stock price.
