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Zacks.com featured highlights include: Louisiana-Pacific, ManpowerGroup, Kulicke and Soffa, Curtiss-Wright and DMC
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For Immediate Release
Chicago, IL – March 20, 2018 - Stocks in this week’s article Louisiana-Pacific Corporation (LPX - Free Report) , ManpowerGroup (MAN - Free Report) , Kulicke and Soffa Industries, Inc. (KLIC - Free Report) , Curtiss-Wright Corporation (CW - Free Report) and DMC Global (BOOM - Free Report) .
Buy These 5 Low-Leverage Stocks to Avoid Interest Rate Risks
In the world of business finance, leverage is a popular investment strategy, through which companies borrow funds to finance business expansion, purchase inventory and other assets as well as support other aspects of business operations. Since companies have limited funds, they need exogenous funding to boost their financial resources from time to time for expansion of operations. So, a company can rarely avoid borrowing funds.
Although one may resort to equity financing, in corporate finance, debt-financing is a more viable option due to its cheap availability. Another perk of debt financing is that the interest on debt is tax deductible.
Yet, the word “debt” is unnerving for many. This is because while debt brings with it the capacity to spend a little bit more, it also carries the burden of repayment with additional interest in the future. In fact, the related amount of interest expense may overwhelm the borrower if it does not earn sufficient returns to offset the interest expense. This is particularly a problem when interest rates rise or the returns from assets decline.
With the current macroeconomic scenario in the United States being in favor of interest rate hikes, the market seems to be not so suitable for borrowers.
Nevertheless, this does not mean that equity investments are too risky and investing in stocks might not lead to perceived returns. After all, in spite of such high debt levels, the United States remains the largest economy in the world in terms of GDP, representing a quarter share of the global economy per the latest World Bank figures.
In fact, it has been an inherent instrument for corporations to increase their earnings. However, the problem is that companies with high debt loads are more vulnerable during economic downturns and can even go bankrupt, especially in periods of high interest rate.
Considering this, the need of the hour is to choose stocks prudently, avoiding those that carry high debt loads. So the crux of a 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.
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.
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Zacks.com featured highlights include: Louisiana-Pacific, ManpowerGroup, Kulicke and Soffa, Curtiss-Wright and DMC
For Immediate Release
Chicago, IL – March 20, 2018 - Stocks in this week’s article Louisiana-Pacific Corporation (LPX - Free Report) , ManpowerGroup (MAN - Free Report) , Kulicke and Soffa Industries, Inc. (KLIC - Free Report) , Curtiss-Wright Corporation (CW - Free Report) and DMC Global (BOOM - Free Report) .
Buy These 5 Low-Leverage Stocks to Avoid Interest Rate Risks
In the world of business finance, leverage is a popular investment strategy, through which companies borrow funds to finance business expansion, purchase inventory and other assets as well as support other aspects of business operations. Since companies have limited funds, they need exogenous funding to boost their financial resources from time to time for expansion of operations. So, a company can rarely avoid borrowing funds.
Although one may resort to equity financing, in corporate finance, debt-financing is a more viable option due to its cheap availability. Another perk of debt financing is that the interest on debt is tax deductible.
Yet, the word “debt” is unnerving for many. This is because while debt brings with it the capacity to spend a little bit more, it also carries the burden of repayment with additional interest in the future. In fact, the related amount of interest expense may overwhelm the borrower if it does not earn sufficient returns to offset the interest expense. This is particularly a problem when interest rates rise or the returns from assets decline.
With the current macroeconomic scenario in the United States being in favor of interest rate hikes, the market seems to be not so suitable for borrowers.
Nevertheless, this does not mean that equity investments are too risky and investing in stocks might not lead to perceived returns. After all, in spite of such high debt levels, the United States remains the largest economy in the world in terms of GDP, representing a quarter share of the global economy per the latest World Bank figures.
In fact, it has been an inherent instrument for corporations to increase their earnings. However, the problem is that companies with high debt loads are more vulnerable during economic downturns and can even go bankrupt, especially in periods of high interest rate.
Considering this, the need of the hour is to choose stocks prudently, avoiding those that carry high debt loads. So the crux of a 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.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/296112/buy-these-5-low-leverage-stocks-to-avoid-interest-rate-risk
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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Visit: 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 http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.