- Home Depot Inc. (The) (HD)
- Dollarama Inc. (DOL)
- Canada Goose Holdings Inc. Subordinate Voting Shares (GOOS)
- Hilton Worldwide Holdings Inc. (HLT)
debt/Equity 158%
thanks Gord
For companies with high Returns on Equity (ROEs), debt-to-equity may not be an appropriate metric to evaluate the leverage profile. Very great businesses with superb ROEs such as HD, DOL, HLT, etc. can run their businesses with even negative equity capital without any difficulty in liquidity issues. On the other hand, debt-to-equity may be a better fit for capital-intensive companies, or financial companies (insurance, banks). Therefore, we think better metrics such as net debt/EBITDA can be used to assess these companies. The net debt/EBITDA of GOOS is currently around 2.7x, at the high range of historical averages in the last six years (0.3x – 2.8x). Overall, the leverage profile has turned sour over the last few years, but not a red flag yet.