Low Corporate Debt to Equity Is Usually Better

Alter you have picked a stock with a small or reasonable number of
shares in its capitalization, it pays to check the percentage of the
firm's total capitalization represented by long-term debt or bonds.
Usually the lower the debt ratio, the safer and better the company.
Earnings per share of companies with high debt-to-equity ratios can
be clobbered in difficult periods of high interest rates. These highly
leveraged companies generally are deemed to be of poorer quality and
higher risk.
A corporation that has been reducing its debt as a percent of equity
over the last two or three years is well worth considering. If nothing
else, the company's interest expense will be materially reduced and
should result in increased earnings per share.
The presence of convertible bonds in a concern's capital structure
could dilute corporate earnings if and when the bonds are converted
into shares of common stock.
It should be understood that smaller capitalization stocks are less liquid,
are substantially more volatile, and will tend to go up and down
faster; therefore, they involve additional risk as well as greater opportunity.
There are, however, definite ways of minimizing your risks, which
will be discussed in Chapter 9.
Lower-priced stocks with thin (small) capitalization and no institutional
sponsorship or ownership should be avoided, since they have
poor liquidity and a lower-grade following.
A stock's daily trading volume is our best measure of its supply and
demand. Trading volume should dry up on corrections and increase
significantly on rallies. As a stock's price breaks out of a sound and
proper base structure, its volume should increase at least 50% above
normal. In many cases, it can increase 100% or more.
In summary, remember: stocks with a small or reasonable number of
shares outstanding will, other things being equal, usually outperform
older, large capitalization companies.