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5 Low-Leverage Stocks to Secure Your Portfolio in 2nd Half 2020
The coronavirus outbreak has sent the global economy on a roller-coaster ride, particularly from March 2020. Consequently, the stock market has also been volatile.
Investors should choose stocks wisely amid these uncertain times as debt-ridden stocks bear high risk of solvency.
However, borrowing funds is a very common phenomenon among companies. For such borrowings, most often companies resort to debt financing though there is also the option of equity financing.
The reason behind such preference is the easy and cheap availability of debt compared to equity.
Yet, debt financing has its share of drawbacks. The problem arises when the amount of debt a company bears becomes exorbitant. A high degree of financial leverage means high interest payments, which affect the company's bottom line.
Therefore, to safeguard one’s portfolio from notable losses, the real challenge for an investor is determining whether the organization’s debt level is sustainable. A debt-free corporation is rare to find. Historically several leverage ratios have been developed to measure the amount of debt a company bears and the debt-to-equity ratio is one of the most common ratios.
Analyzing Debt/Equity
Debt-to-Equity Ratio = Total Liabilities/Shareholders’ Equity
This metric is a liquidity ratio that indicates the amount of financial risk a company bears. A company with a lower debt-to-equity ratio shows improved solvency for a company.
With Q2 earnings knocking on our doors, investors may intend to choose companies that have exhibited solid earnings growth. However, blindly pursuing high earnings yielding stocks, which have a high debt-to-equity ratio, might drain all your money before you know.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
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Zacks.com featured highlights include: Boise Cascade, Lakeland Industries, NextEra Energy, FormFactor and West Pharmaceutical Services
For Immediate Release
Chicago, IL – July 20, 2020 – Stocks in this week’s article are Boise Cascade (BCC - Free Report) , Lakeland Industries (LAKE - Free Report) , NextEra Energy (NEE - Free Report) , FormFactor (FORM - Free Report) and West Pharmaceutical Services (WST - Free Report) .
5 Low-Leverage Stocks to Secure Your Portfolio in 2nd Half 2020
The coronavirus outbreak has sent the global economy on a roller-coaster ride, particularly from March 2020. Consequently, the stock market has also been volatile.
Investors should choose stocks wisely amid these uncertain times as debt-ridden stocks bear high risk of solvency.
However, borrowing funds is a very common phenomenon among companies. For such borrowings, most often companies resort to debt financing though there is also the option of equity financing.
The reason behind such preference is the easy and cheap availability of debt compared to equity.
Yet, debt financing has its share of drawbacks. The problem arises when the amount of debt a company bears becomes exorbitant. A high degree of financial leverage means high interest payments, which affect the company's bottom line.
Therefore, to safeguard one’s portfolio from notable losses, the real challenge for an investor is determining whether the organization’s debt level is sustainable. A debt-free corporation is rare to find. Historically several leverage ratios have been developed to measure the amount of debt a company bears and the debt-to-equity ratio is one of the most common ratios.
Analyzing Debt/Equity
Debt-to-Equity Ratio = Total Liabilities/Shareholders’ Equity
This metric is a liquidity ratio that indicates the amount of financial risk a company bears. A company with a lower debt-to-equity ratio shows improved solvency for a company.
With Q2 earnings knocking on our doors, investors may intend to choose companies that have exhibited solid earnings growth. However, blindly pursuing high earnings yielding stocks, which have a high debt-to-equity ratio, might drain all your money before you know.
For the rest of this Screen of the Week article please visit Zacks.com at:https://www.zacks.com/stock/news/1008479/5-low-leverage-stocks-to-secure-your-portfolio-in-2h2020
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.