3 Debt-Free Companies Worth Investing In

With corporate borrowing rates at historic lows, most companies have opted to tap into the debt market to bolster liquidity and fund growth initiatives. But others have stayed clear of debt instead preferring to rely solely on the equity markets.

There are merits to both capital raising approaches. However, some investors like to focus on low or no debt companies because of their perceived lower risk.

Besides all being strong S&P 500 performers, these three companies all travel lightly when it comes to carrying debt on their books—and to say the least, the strategy is working quite well.

 Can Fortinet Remain a Cybersecurity Leader?

Fortinet (NASDAQ:FTNT) provides network security solutions for businesses and governments around the world. With so many people working from home, demand for its products has been strong. And even as employees gradually return to the office, Fortinet should continue to benefit from elevated levels of enterprise cybersecurity spending.

Although Fortinet competes in a market that is more crowded than it was a few years ago, it has a strong distribution network and a well-established global customer base (including many Fortune 100 companies) that is nearing the half million mark. It will be hard for competitors to dethrone this leader.

Fortinet's financial strength also sets it apart from its network security peers. It manages a best-in-class balance sheet that contains no debt and an increasing $1.7 billion cash position.

Besides the lack of debt, there's a lot to like about Fortinet. For starters it has repeatedly topped earnings expectations and is a model of consistent growth. Revenues have increased 19% on average over the last three years—and the outlook for top line growth this year is also 19%.

Fortinet stock is neither cheap nor crazy expensive at 49x earnings. Given the company's growth metrics and leadership position in cybersecurity, it's a solid long-term technology play. There is probably a better entry point to be had, but any weakness in the stock should be considered a secure spot to jump in.

Will Intuitive Surgical Return to Growth?

Speaking of innovative leaders, Intuitive Surgical (NASDAQ:ISRG) is another debt-free company with a compelling growth story. The robotic surgery juggernaut has delivered 16% annual profit growth over the last five years and has ample room to expand into new markets.

With its flagship, daVinci surgical system, Intuitive is still in the early stages of replicating its stronghold in the domestic market overseas. Increasing demand for its more precise, value-added surgery technology in Europe and Asia is the backbone for multi-year international growth.

Perhaps the most interesting aspect of Intuitive' s business model is that it generates most of its revenue from post-sale products and services. In other words, after it places its expensive robot-assisted surgery machines, it offers customers a broad range of tools and consumables that extend the value of the relationship until customers potentially upgrade to a new model down the road. Instruments, accessories, and services account for roughly 70% of revenues. This gives the company a nice recurring revenue setup that helps offset the lumpiness and risk associated with DaVinci system sales.

Although sales and earnings are expected to regress this year due to pandemic-related surgery cancellations and delays, they are forecast to return with a vengeance in 2021 when analysts see EPS growth of 35%.

Intuitive Surgical's balance sheet has the anatomy of a winning stock. It doesn't contain any debt and has more than $4.7 billion in cash. This will help it not only weather the current storm but allow it to pursue growth opportunities through acquisition and initiatives around artificial intelligence

Like many stocks these days, Intuitive Surgical is trading near an all-time high, but that shouldn't deter investors. Yes, there is plenty of near-term uncertainty around the impact of rising coronavirus cases on its business, but over the time the growth runway looks clear.

Does Monster Beverage Have a Healthy Balance Sheet?

Monster Beverage (NASDAQ:MNST) is another debt-free company that keeps chugging along. While some growth stocks are just now returning to their levels from early March, Monster got there by late May and hasn't looked back since.

Similar to Fortinet, Monster's profit growth is a model of consistency. After growing EPS at a 12% clip over the last three years, bottom line growth is forecast to be 13% and 14%, this year and next year, respectively.

The maker of popular energy drinks has relied on product innovation and distribution expansion to keep the growth energized. With a collection of caffeinated brands like Reign, Full Throttle, NOS to go along with its expanding lineup of coffee- and juice-based Monster cans, Monster has a scary stranglehold on the energy drink market. Unless you're a die-hard Red Bull fan, its hard to buy an energy drink these days without succumbing to the Monster.

While its beverage industry peers have on average one-third of their capital structure in debt, Monster's debt-free balance sheet is the byproduct of a cash flow machine. The company exited the latest quarter with more than $1 billion of cash on the books. Absent debt liabilities, this is a nice chunk of change to be able to deploy to growth projects, M&A activity, and additional share buybacks.

Given the financial strength, rapidly broadening beverage portfolio, and opportunities for international growth, investors can expect Monster to continue to terrorize the competition.

Despite trading at an all-time just shy of $90, Monster remains one of the most favored beverage companies on the Street. Earlier this week, Goldman Sachs gave Monster with a buy rating and $105 price target. Like its products, Monster stock isn't cheap, but its hard to argue with the valuation.