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For Immediate Release

Chicago, IL – October 7, 2020 - Stocks in this week’s article are LHC Group (LHCG - Free Report) , DICKS Sporting Goods (DKS - Free Report) , Horace Mann Educators (HMN - Free Report) , Arcosa (ACA - Free Report) and Lumber Liquidators Holdings (LL - Free Report) .

Buy These 5 Low-Leverage Stocks as Market Volatility Persists

Leverage is the use of borrowed funds by corporations for expansion of operations and amplifying possible returns from risk capital. Per the theory of cost of capital, a company’s capital structure reflects a mix of debt and equity that is used to finance capital projects.

However, historically, debt financing has been preferred over equity because of its easy and cheap availability.

Yet, debt financing has its share of drawbacks. In particular, when the amount of debt a company bears becomes exorbitant, debt financing turns into a burden. This is because a high degree of financial leverage means high interest payments, which affect the company's bottom line.

To this end, one should be aware of the fact that the stock market has become volatile ever since the deadly coronavirus struck across the globe around the end of March.  Although the situation has improved to some extent, an entire rebound of the market to the pre-pandemic levels is highly unlikely in the near future.

Therefore, while choosing stocks, a prudent investor should avoid debt-ridden stocks as they bear high risk of solvency. Since a totally debt-free stock is hardly found, investing in a stock with comparatively lower debt level should be a prudent choice for investors.

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.

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