I want to invest in companies that are highly leveraged as the leverage can generates higher returns (of course it can led to higher losses also). But how can I identify those companies which are highly leveraged but at the same time can effectively use that debt to generate higher returns than cost of the capital. How can I filter those companies. Is there any specific criteria. Should I look for debt to equity ratio equal or greater than 1 and interest coverage ratio > 3 and ROCE consistently > 20%. Or I should follow some other approach.
Please share your comments and suggestions.
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