For Immediate Release
Chicago, IL – March 4, 2021 – Stocks in this week’s article are MarineMax, Inc. (
HZO Quick Quote HZO - Free Report) , Quanex Building Product Corporation ( NX Quick Quote NX - Free Report) , LouisianaPacific Corporation ( LPX Quick Quote LPX - Free Report) , STMicroelectronics N.V. ( STM Quick Quote STM - Free Report) and Franklin Electric Co., Inc. ( FELE Quick Quote FELE - Free Report) . Buy These 5 Low Leverage Stocks to Boost Your Portfolio
Leverage is a common practice in corporate finance, which refers to the use of exogenous funds by companies to run their operations smoothly and expand the same. Now, companies can obtain these exogenous funds either through equity financing or debt financing.
Statistically, it is found that debt financing is preferred over equity because of its easy and cheap availability.
However, debt financing has its own 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 avert companies that resort to exorbitant debt financing.
Therefore, the crux of safe investment lies in choosing a company that is not overtly burdened with debt as a debt-free stock is almost impossible to be found.
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.
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 the fourth quarter reporting cycle almost in its last lap, investors might be eyeing stocks that have exhibited solid earnings growth in recent quarters. But if a stock bears a high debt-to-equity ratio, in times of economic downturns, its so-called booming earnings picture might turn into a nightmare.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1272415/buy-these-5-low-leverage-stocks-to-boost-your-portfolio 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
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