For Immediate Release
Chicago, IL – May 25, 2021 – Stocks in this week’s article are MarineMax, Inc. (
HZO Quick Quote HZO - Free Report) , Titan Machinery Inc. ( TITN Quick Quote TITN - Free Report) , Darling Ingredients Inc. ( DAR Quick Quote DAR - Free Report) , EchoStar Corporation ( SATS Quick Quote SATS - Free Report) and Targa Resources Corp. ( TRGP Quick Quote TRGP - Free Report) . 5 Low Leverage Stocks to Buy If You Want to Invest Safely
Leverage is a well-known strategy in corporate finance, which refers to the use of borrowed capital by companies in their business operations. This borrowing can be done either through equity or debt financing.
Empirically, it has been observed that the majority of companies prefer debt financing over equity to obtain such funds. This is because debt is cheaper than equity, especially in periods of low interest rates. Moreover, in case of equity financing, a shareholder not only becomes a company's partial owner but also gets entitled to a direct claim on its future profits. So most companies try to avoid equity financing.
However, not always debt financing is desirable, especially in cases where a company opts for too much debt. In fact, exorbitant debt financing might even cause a corporation's bankruptcy in a worst-case scenario. Therefore, the debt level of a company is an important point of consideration while making an investment decision.
So, for a prudent investor, a safe strategy of choosing stocks should also include search for stocks that bear low leverage, apart from other factors. Therefore, measuring the leverage of a particular stock forms an integral part of the safe investment procedure.
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 this year's first-quarter reporting cycle almost over, investors might be eyeing stocks that have exhibited solid earnings growth in the 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/1598205/5-low-leverage-stocks-to-buy-if-you-want-to-invest-safely 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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Contact: Jim Giaquinto
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