It is always a great idea to buy stocks that are not only debt free, but, also have solid cash flows. These stocks also tend to provide great dividends, but, since the prices are high for such stocks, their dividend yields may not always be the best. Take a look at a few stocks that are debt free and can be good investment bets.
Kaveri Seed Company
Kaveri Seed Company is into the manufacture of genetically enhanced seed and has been doing so for for more than three decades. The company has 600 acres of farm land with a dedicated team of researchers.
The company has a R&D programme for crops maize, cotton, bajra, sorghum, sun flower, rice and several vegetable crop.
The company in the past has been over reliant on cotton seeds, which make-up bulk of the turnover of the company.
However, it is now gradually shifting its focus to vegetable seeds, which will is a high margin business. Kaveri Seed is also looking at improving its distribution network tremendously in the coming months.
Kaveri Seed: Expanding areas and market share
Kaveri Seeds is looking at the possibility of expanding its market share. It has already improved its market share in areas like Gujarat and Maharashtra due to better penetration. The company is also looking at aggressively developing areas like Orissa, Chattisgarh and Madhya Pradesh.
All these initiatives are likely to bear fruit at the company. Kaveri Seed is a debt free company and also has a small equity with a large promoter holding.
The company's shares are available at just 12 times likely EPS of Rs 41 in 2019. If you value the stock at a p/e of 18 times, the stock should trade at Rs 738 at the very least in the coming two years. Check stock quote of Kaveri Seed here
Tata Sponge Iron
Tata Sponge Iron is a debt free company with a decent cash on its books. What makes the stock an interesting pick are a number of reasons. First, are the company's plans to raise capacity to 425,000 tonne per annum from 390,000 tonne per annum.
This should augur well for the company in terms of generating further cash flow. The company is also planning to enter long steel products and this project is likely to be completed in the next few years. This is likely to further give a boost to profits, which has already jumped from Rs 21.20 crores for the period ending March 31, 2017 to Rs 27.61 crores for the period ending Sept 30, 2017.
Tata Sponge: Huge opportunities
Tata Sponge Iron has huge opportunities going forward especially on account of manufacturing facilities that are very close to high quality iron ore mines.
The company also has an integrated power plant and also sells surplus power that is generated. For the quarter ending Sept 30, 2017, the company reported an EPS of Rs 17.92. Even if the company does an EPS of Rs 90 considering all the expansions plans by 2019-20, the stock is available at a p/e of just 10 times this EPS. The stock is not a bad bet at Rs 910, considering the low equity, free cash flow and huge cash on the books.
Sun TV is the leading player of satellite television in the south and owns a range of "Sun TV" channels in different South Indian languages.
This is again a debt free company with a very high dividend payment.
Sun TV is likely to be one of the biggest beneficiaries of the digitization drive initiated by the government of India. The promoters have also been acquitted by the Supreme Court, which is another positive for the company.
A good buy
Recently, the shares surged as much as 10 per cent on a single day after reports that Tamil Nadu Arasu Cable TV Corporation had launched its digital system from September 1, 2017. This many believe could result in Rs 70-80 crore revenues per year can be gained from the digitisation exercise.
The company has a strong position in the south and dominates certain markets. We believe that the company can report an EPS of Rs 50 for 2017-18, which makes the stock a little expensive at the current market price of Rs 858.
If you get the stock at around the Rs 700 levels, it would be a good time to buy into the stock. Again, the promoters of the company have a very high holding in the stock. A good debt free company to own.
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