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Bet on These 4 Low-Leverage Stocks Amid Easing Inflation
U.S. stocks are anticipated to gain once the market opens on Jan 16, with a slowdown expected in the nation's inflation trend. As stated recently by CNBC, the University of Michigan consumer sentiment survey on Jan 13 showed that the one-year inflation outlook was down to 4%, which reflects the lowest level since April 2021.
This might excite an investor to bet on stocks that are already showing signs of growth. However, a prudent investor knows that only a growth exhibiting character is not sufficient while choosing a stock. If one wants to avoid huge losses in times of crisis, one needs to look for relatively safe bets. To this end, we recommend stocks like Oxford Industries,Ingredion, Novo Nordisk, Helmerich & Payne and Fox Factory Holdings, which bear low leverage and therefore can shield investors from incurring losses in times of crisis.
Now, before selecting low-leverage stocks, let's explore what leverage is and how choosing a low-leverage stock helps investors.
In finance, leverage is a term used to denote the practice of borrowing capital by companies to run their operations smoothly and expand the same. Such borrowings are done through debt financing. But there remains an option for equity finance. This is probably due to the cheap and easy availability of debt over equity financing.
However, debt financing has its share of drawbacks. Particularly, it is desirable only as long as it successfully generates a higher rate of return compared to the interest rate. So, to avoid considerable losses in your portfolio, one should always avoid companies that resort to exorbitant debt financing.
Therefore, the crux of safe investment lies in choosing a company that is not burdened with debt, as a debt-free stock is almost impossible to find.
Such an event shows how volatile the equity market can be at times and as an investor if you don't want to lose big time, we suggest you invest in stocks, which bear low leverage and are hence less risky.
To identify such stocks, 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 lower debt-to-equity ratio reflects improved solvency for a company.
With the fourth-quarter earnings cycle knocking at the doors, investors must be eyeing stocks that have exhibited solid earnings growth in the recent past. But if a stock bears a high debt-to-equity ratio in times of economic downturn, its so-called booming earnings picture might turn into a nightmare.
Excluding stocks that have a negative or a zero debt-to-equity ratio, here we present our five picks that made it through the screen.
Oxford Industries: It is an apparel company, which designs, sources, markets and distributes products bearing the trademarks of its owned and licensed brands. On Dec 7, 2022, the company announced its third-quarter fiscal 2022 results. Its consolidated net sales increased 26% year over year to $313 million in the last reported quarter.
OXM delivered an earnings surprise of 18.94%, on average, in the trailing four quarters. It carries a Zacks Rank #2 currently. The Zacks Consensus Estimate for fiscal 2023 earnings implies a 34.4% improvement from the fiscal 2022 reported figure.
Ingredion: It is an ingredients solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients, which serve diverse sectors in food, beverage, brewing, pharmaceuticals and other industries. In December 2022, Ingredion announced that its 2030 emissions reduction targets have been approved by the Science Based Targets initiative (SBTi) and are consistent with levels required to meet the goals set by the Paris Agreement.
INGR currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its 2022 earnings suggests a 5.9% improvement year over year.
Novo Nordisk: It is a global healthcare company and a leader in the worldwide diabetes market. The company is also a key player in hemophilia care, growth hormone therapy, hormone replacement therapy and obesity. Recently, the company revealed that the U.S. Food and Drug Administration (FDA) approved a label update for Rybelsus (semaglutide) tablets, the first and only GLP-1 analog in pill form. It is indicated, along with diet and exercise, to improve glycemic control for adults with type 2 diabetes.
NVO carries a Zacks Rank #2 and delivered an earnings surprise of 3.09%, on average, in the trailing four quarters. The Zacks Consensus Estimate for 2022 earnings indicates a 2.4% improvement from the 2021 figure. You can see the complete list of today's Zacks #1 Rank stocks here.
Helmerich & Payne: It is engaged in the contract drilling of oil and gas wells in the United States and internationally. In November 2022, the company announced its fourth-quarter fiscal 2023 results. It reported revenues of $631.3 million, reflecting a surge of 83.6% from the year-ago quarter's reported figure.
HP currently sports a Zacks Rank #1. It delivered a four-quarter earnings surprise of 124.22%, on average. The Zacks Consensus Estimate for 2022 sales suggests a 45.6% improvement from the 2021 reported figure.
Fox Factory: It is a designer, manufacturer and marketer of suspension products used primarily on mountain bikes, side-by-side vehicles, on-road vehicles, off-road vehicles, all-terrain vehicles, snowmobiles, specialty vehicles and applications and motorcycles. In November 2022, the company announced its third-quarter fiscal 2022 results, wherein its gross profit increased 18.3% year over year to $137.3 million,
FOXF currently carries a Zacks Rank #2. It delivered a four-quarter earnings surprise of 9.09%, on average. The Zacks Consensus Estimate for 2022 earnings suggests a 17.1% improvement from the 2021 reported figure.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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 https://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 Oxford Industries, Ingredion, Novo Nordisk, Helmerich & Payne and Fox Factory Holdings
For Immediate Release
Chicago, IL – January 17, 2023 – Stocks in this week’s article are Oxford Industries (OXM - Free Report) , Ingredion (INGR - Free Report) , Novo Nordisk (NVO - Free Report) , Helmerich & Payne (HP - Free Report) and Fox Factory Holdings (FOXF - Free Report) .
Bet on These 4 Low-Leverage Stocks Amid Easing Inflation
U.S. stocks are anticipated to gain once the market opens on Jan 16, with a slowdown expected in the nation's inflation trend. As stated recently by CNBC, the University of Michigan consumer sentiment survey on Jan 13 showed that the one-year inflation outlook was down to 4%, which reflects the lowest level since April 2021.
This might excite an investor to bet on stocks that are already showing signs of growth. However, a prudent investor knows that only a growth exhibiting character is not sufficient while choosing a stock. If one wants to avoid huge losses in times of crisis, one needs to look for relatively safe bets. To this end, we recommend stocks like Oxford Industries,Ingredion, Novo Nordisk, Helmerich & Payne and Fox Factory Holdings, which bear low leverage and therefore can shield investors from incurring losses in times of crisis.
Now, before selecting low-leverage stocks, let's explore what leverage is and how choosing a low-leverage stock helps investors.
In finance, leverage is a term used to denote the practice of borrowing capital by companies to run their operations smoothly and expand the same. Such borrowings are done through debt financing. But there remains an option for equity finance. This is probably due to the cheap and easy availability of debt over equity financing.
However, debt financing has its share of drawbacks. Particularly, it is desirable only as long as it successfully generates a higher rate of return compared to the interest rate. So, to avoid considerable losses in your portfolio, one should always avoid companies that resort to exorbitant debt financing.
Therefore, the crux of safe investment lies in choosing a company that is not burdened with debt, as a debt-free stock is almost impossible to find.
Such an event shows how volatile the equity market can be at times and as an investor if you don't want to lose big time, we suggest you invest in stocks, which bear low leverage and are hence less risky.
To identify such stocks, 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 lower debt-to-equity ratio reflects improved solvency for a company.
With the fourth-quarter earnings cycle knocking at the doors, investors must be eyeing stocks that have exhibited solid earnings growth in the recent past. But if a stock bears a high debt-to-equity ratio in times of economic downturn, its so-called booming earnings picture might turn into a nightmare.
Excluding stocks that have a negative or a zero debt-to-equity ratio, here we present our five picks that made it through the screen.
Oxford Industries: It is an apparel company, which designs, sources, markets and distributes products bearing the trademarks of its owned and licensed brands. On Dec 7, 2022, the company announced its third-quarter fiscal 2022 results. Its consolidated net sales increased 26% year over year to $313 million in the last reported quarter.
OXM delivered an earnings surprise of 18.94%, on average, in the trailing four quarters. It carries a Zacks Rank #2 currently. The Zacks Consensus Estimate for fiscal 2023 earnings implies a 34.4% improvement from the fiscal 2022 reported figure.
Ingredion: It is an ingredients solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients, which serve diverse sectors in food, beverage, brewing, pharmaceuticals and other industries. In December 2022, Ingredion announced that its 2030 emissions reduction targets have been approved by the Science Based Targets initiative (SBTi) and are consistent with levels required to meet the goals set by the Paris Agreement.
INGR currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its 2022 earnings suggests a 5.9% improvement year over year.
Novo Nordisk: It is a global healthcare company and a leader in the worldwide diabetes market. The company is also a key player in hemophilia care, growth hormone therapy, hormone replacement therapy and obesity. Recently, the company revealed that the U.S. Food and Drug Administration (FDA) approved a label update for Rybelsus (semaglutide) tablets, the first and only GLP-1 analog in pill form. It is indicated, along with diet and exercise, to improve glycemic control for adults with type 2 diabetes.
NVO carries a Zacks Rank #2 and delivered an earnings surprise of 3.09%, on average, in the trailing four quarters. The Zacks Consensus Estimate for 2022 earnings indicates a 2.4% improvement from the 2021 figure. You can see the complete list of today's Zacks #1 Rank stocks here.
Helmerich & Payne: It is engaged in the contract drilling of oil and gas wells in the United States and internationally. In November 2022, the company announced its fourth-quarter fiscal 2023 results. It reported revenues of $631.3 million, reflecting a surge of 83.6% from the year-ago quarter's reported figure.
HP currently sports a Zacks Rank #1. It delivered a four-quarter earnings surprise of 124.22%, on average. The Zacks Consensus Estimate for 2022 sales suggests a 45.6% improvement from the 2021 reported figure.
Fox Factory: It is a designer, manufacturer and marketer of suspension products used primarily on mountain bikes, side-by-side vehicles, on-road vehicles, off-road vehicles, all-terrain vehicles, snowmobiles, specialty vehicles and applications and motorcycles. In November 2022, the company announced its third-quarter fiscal 2022 results, wherein its gross profit increased 18.3% year over year to $137.3 million,
FOXF currently carries a Zacks Rank #2. It delivered a four-quarter earnings surprise of 9.09%, on average. The Zacks Consensus Estimate for 2022 earnings suggests a 17.1% improvement from the 2021 reported figure.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2039499/bet-on-these-5-low-leverage-stocks-amid-easing-inflation
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.
Contact: Jim Giaquinto
Company: Zacks.com
Phone: 312-265-9268
Email: pr@zacks.com
Visit: https://www.zacks.com/
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 https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.