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Zacks.com featured highlights include: Bonanza Creek Energy, Quanta Services, Titan Machinery, Genco Shipping & Trading and AdvanSix
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For Immediate Release
Chicago, IL – November 3, 2021 – Stocks in this week’s article are Bonanza Creek Energy, Inc. , Quanta Services, Inc. (PWR - Free Report) , Titan Machinery Inc. (TITN - Free Report) , Genco Shipping & Trading Limited (GNK - Free Report) and AdvanSix Inc. (ASIX - Free Report) .
Want to Avoid a Debt Trap? Buy These 5 Low-Leverage Stocks
With capital being one of the basic factors of production, companies need exogenous funds to finance their corporate expenses, run operations smoothly as well as expand their business. This is because no company has unlimited capital resources.
And here comes the concept of leverage, which is a term used to denote the practice of borrowing capital by companies to run their operations smoothly and expand the same. Mostly, such borrowings are done through debt financing, although there remains an option for equity finance. This is probably due to the cheap and easy availability of debt over equity financing.
In fact, statistics indicate that the United States, the richest economy in the world, is the biggest borrower. Over the years, huge spending on wars, big tax cuts and stimulating economic programs have all added to the nation’s burden. The Congressional Budget Office estimates federal debt to rise to 102% of the economy's GDP by the end of 2021.
One should not refrain from investing in a stock if it bears some amount of debt. However, too much debt increases the chance of a company going toward bankruptcy.
So, there is always a need for a reliable metric to measure a company’s debt level, thereby enabling an investor to choose a low-leverage stock, which is likely to bear less risk. One such metric is debt-to-equity ratio that has been used frequently in history to measure the leverage of a company.
Analyzing Debt/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 shows improved solvency for a company.
As we are in the middle of the third-quarter earnings season, investors must be eyeing stocks that have exhibited solid earnings growth in the recent past. 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.
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 https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks.com featured highlights include: Bonanza Creek Energy, Quanta Services, Titan Machinery, Genco Shipping & Trading and AdvanSix
For Immediate Release
Chicago, IL – November 3, 2021 – Stocks in this week’s article are Bonanza Creek Energy, Inc. , Quanta Services, Inc. (PWR - Free Report) , Titan Machinery Inc. (TITN - Free Report) , Genco Shipping & Trading Limited (GNK - Free Report) and AdvanSix Inc. (ASIX - Free Report) .
Want to Avoid a Debt Trap? Buy These 5 Low-Leverage Stocks
With capital being one of the basic factors of production, companies need exogenous funds to finance their corporate expenses, run operations smoothly as well as expand their business. This is because no company has unlimited capital resources.
And here comes the concept of leverage, which is a term used to denote the practice of borrowing capital by companies to run their operations smoothly and expand the same. Mostly, such borrowings are done through debt financing, although there remains an option for equity finance. This is probably due to the cheap and easy availability of debt over equity financing.
In fact, statistics indicate that the United States, the richest economy in the world, is the biggest borrower. Over the years, huge spending on wars, big tax cuts and stimulating economic programs have all added to the nation’s burden. The Congressional Budget Office estimates federal debt to rise to 102% of the economy's GDP by the end of 2021.
One should not refrain from investing in a stock if it bears some amount of debt. However, too much debt increases the chance of a company going toward bankruptcy.
So, there is always a need for a reliable metric to measure a company’s debt level, thereby enabling an investor to choose a low-leverage stock, which is likely to bear less risk. One such metric is debt-to-equity ratio that has been used frequently in history to measure the leverage of a company.
Analyzing Debt/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 shows improved solvency for a company.
As we are in the middle of the third-quarter earnings season, investors must be eyeing stocks that have exhibited solid earnings growth in the recent past. 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/1821781/want-to-avoid-a-debt-trap-buy-these-5-low-leverage-stocks
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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Company: Zacks.com
Phone: 312-265-9268
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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 https://www.zacks.com/performance for information about the performance numbers displayed in this press release.