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Zacks.com featured highlights: Big Lots, Louisiana-Pacific, Valero Energy, The Bank of Nova Scotia, and Manulife Financial

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For Immediate Release

Chicago, IL – October 25, 2017 - Stocks in this week’s article include Big Lots, Inc. (BIG - Free Report) , Louisiana-Pacific Corporation (LPX - Free Report) , Valero Energy Corporation (VLO - Free Report) , The Bank of Nova Scotia (BNS - Free Report) , and Manulife Financial Corp (MFC - Free Report) .

Screen of the Week by Zacks Investment Research:

Buy These 5 Low-Leverage Stocks to Ensure Safe Returns

Leverage, in particular financial leverage, is a popular investment strategy of using borrowed capital. Sometimes, it also refers to the amount of debt that a company uses to finance its operations. Although there is option for equity financing, a comparative analysis of the theory of cost of capital reveals that most companies prefer debt financing over equity since debt is cheaper, especially in periods of low interest rates.

However, no one voluntarily wishes to be part of a debt-ridden nation. This is because debt brings with it the burden of interest payments. Therefore, companies with a lower level of debt are usually considered safe bets. This is because highly leveraged stocks are vulnerable in times of volatility.

Interestingly, America – the richest economy in the world is the biggest borrower too. In fact, according to the FY19 Federal Budget, at the end of FY 2018, gross U.S. federal government debt is estimated to be $21.09 trillion, more than double than the debt load the nation bore in the last decade.

Nevertheless, this does not indicate that one should refrain from investing in U.S. stocks. Even after holding so much of debt, the United States remains the largest economy in the world in terms of GDP, representing a quarter share of global economy per the latest World Bank figures.

Considering this, the need of the hour is to choose stocks prudently, avoiding those that carry high debt loads. So the crux of safe investment lies in identifying low leverage stocks.

This is where the significance of financial leverage ratio comes into play. This ratio measures the extent of financial leverage a company bears. Several leverage ratios have been developed for this purpose, with debt-to-equity ratio being the most popular among them.

Analyzing Debt-to-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 implies that it has a more or less financially stable business, thereby making it a more worthy investment opportunity.

With the Q3 reporting cycle in full swing, companies recording higher earnings growth will attract investors. But if they bear high leverage, then they might not generate satisfactory returns. This is because at the time of economic downturns, debt ridden companies are more prone to falling into a debt trap.

The Winning Strategy

Considering the aforementioned discussion, to ensure safe returns it is wise for investors to choose stocks bearing low debt-to-equity ratio.

However, an investment strategy based solely on the debt-to-equity ratio might not fetch the desired outcome. To choose stocks that have the potential to give you steady returns, we have expanded our screening criteria to include some other factors.

For the rest of this Screen of the Week article please visit Zacks.com at:https://www.zacks.com/stock/news/279790/buy-these-5-low-leverage-stocks-to-ensure-safe-returns

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

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