An easy way to identify companies
You probably see “best stocks” articles regularly, but it might be just as important to read those that highlight the worst so you know which to avoid.
Still, there’s no easy way to prepare a list of the most troubled publicly traded companies because the criteria can be different for each industry. And as you’ll see below, even money-losing companies can hand investors hefty gains.
Banks, for example, tend to be highly leveraged, as they’re in the business of debt (loans, mortgages). So a high debt-to-equity ratio that might be alarming for an industrial manufacturer might not be a big deal for a bank or financial company.
An easy way to identify companies of concern is to start with earnings, but that doesn’t mean all will be losers. Tesla Motors Inc. TSLA, -4.13% has posted GAAP net losses for seven of the past eight quarters. But it’s not focusing on its bottom line: The company is spending money to build production capacity for the Model S electric car. Tesla said Nov. 5 that it expects production to surge 50% over the next two years and “probably for several years to follow.”