when using the d e ratio it is very important to consider the industry in which the company operates because different industries have different capital needs and growth rates a d e ratio value that s common in one industry might be a red flag in another 
utility stocks often have especially high d e ratios as a highly regulated industry making large investments typically at a stable rate of return and generating a steady income stream utilities borrow heavily and relatively cheaply high leverage ratios in slow growth industries with stable income represent an efficient use of capital companies in the consumer staples sector tend to have high d e ratios for similar reasons 3analysts are not always consistent about what is defined as debt for example preferred stock is sometimes considered equity since preferred dividend payments are not legal obligations and preferred shares rank below all debt but above common stock in the priority of their claim on corporate assets on the other hand the typically steady preferred dividend par value and liquidation rights make preferred shares look more like debt including preferred stock in total debt will increase the d e ratio and make a company look riskier including preferred stock in the equity portion of the d e ratio will increase the denominator and lower the ratio this is a particularly thorny issue in analyzing industries notably reliant on preferred stock financing such as real estate investment trusts reits 