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Want to Invest in Stocks? Buy These 5 Low-Leverage Equities
The U.S. stock market went through quite an upheaval in the recent past as a cloud of uncertainty loomed large over Russia's invasion of Ukraine and its subsequent repercussions, particularly on the oil price. However, Wall Street rebounded on Mar 24, buoyed by a spike in tech stocks and a dip witnessed in oil price ahead of a NATO meeting on the Russia-Ukraine crisis.
With world leaders tightening sanctions on Russia, the near-term fate of the stock market remains a bit turbulent. Amid such volatility, one might be inclined to choose safe stocks like AdvanSix, Quanex Building Products, Credicorp, Suncor Energy and Exxon Mobil, which bear low leverage.
Now one must know the concept of leverage and its importance in the investment world before choosing low-leverage stocks.
Notably, leverage is a well-known strategy in corporate finance, which refers to the use of borrowed capital by companies in their business operations. Although this borrowing can be done through equity or debt financing, statistically it has been observed that debt financing is preferred over equity by the majority of corporations.
This preference is probably due to the cheap and easy availability of debt over equity financing.
However, at times debt financing can be detrimental for a company's prospects, especially when a company bears too much debt compared to its assets. So, one should look for stocks that are not heavily burdened with debt.
So, the next step should be how to identify such stocks that are not overburdened with debt as a debt-free stock is almost impossible to find.
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.
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.
With the first-quarter earnings cycle ahead of us, 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.
Here are five of the 29 stocks that qualified the screening:
AdvanSix: It is a producer and supplier of Nylon 6 materials. ASIX announced its fourth-quarter 2021 results in February, with year-over-year sales growth of 45%. The company also announced it has agreed to acquire U.S. Amines, which is a leading North American producer of alkyl and specialty amines, for $100 million. This should strengthen AdvanSix's position in the chemical industry.
AdvanSix delivered an earnings surprise of 23.63%, on average, in the trailing four quarters and sports a Zacks Rank #1 currently. The Zacks Consensus Estimate for 2022 earnings has moved up 53% in the past 60 days.
Quanex Building Products: It designs and produces energy-efficient fenestration products in addition to kitchen and bath cabinet components. NX recently announced its first-quarter fiscal 2022 results, wherein its sales improved 16% year over year. This growth was driven by volume increases in the fenestration segments combined with higher prices related to the pass-through of raw material cost inflation.
Quanex Building Products currently carries a Zacks Rank #2. The company delivered an earnings surprise of 17.37% in the trailing four quarters, on average. The Zacks Consensus Estimate for 2022 earnings has moved up 3.2% in the past 60 days.
Credicorp: It is the largest financial services holding company in Peru with extensive experience in the Peruvian financial market. Its net interest income increased 19.8% year over year in fourth-quarter 2021, while the efficiency ratio expanded 230 basis points.
BAP carries a Zacks Rank of 2 and boasts a long-term earnings growth rate of 18.6%. The Zacks Consensus Estimate for 2022 earnings has moved up 9.6% in the past 60 days. You can see the complete list of today's Zacks #1 Rank stocks here.
Suncor Energy: It is a premier integrated energy company. Its operations include oil sands development and upgrade, conventional and offshore crude oil and gas production, petroleum refining, and product marketing. Suncor reported fourth-quarter 2021 adjusted operating earnings of 89 cents per share, reflecting an improvement from the adjusted operating loss of 7 cents incurred in the prior-year quarter.
Currently, Suncor has a Zacks Rank of 2. It boasts a long-term earnings growth rate of 13.8%. Its 2022 earnings estimate has improved 19.5% over the past 60 days.
Exxon Mobil: It is one of the world's largest publicly traded international oil and gas companies. Exxon Mobil announced its plans at its annual Investor Day this March to deliver industry-leading earnings, cash flow growth and shareholder returns, and lead in the energy transition across a range of lower-emissions scenarios. To improve future earnings, XOM is upgrading its portfolio with low-cost-of-supply opportunities by investing in advantaged assets, including Guyana and the U.S. Permian Basin.
Exxon Mobil currently sports a Zacks Rank #1. It delivered a four-quarter earnings surprise of 5.81%, on average. Its 2022 earnings estimate has improved 20.6% over the past 60 days.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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 AdvanSix, Quanex Building Products, Credicorp, Suncor Energy and Exxon Mobil
For Immediate Release
Chicago, IL – March 28, 2022 – Stocks in this week’s article are AdvanSix (ASIX - Free Report) , Quanex Building Products (NX - Free Report) , Credicorp (BAP - Free Report) , Suncor Energy (SU - Free Report) and Exxon Mobil (XOM - Free Report) .
Want to Invest in Stocks? Buy These 5 Low-Leverage Equities
The U.S. stock market went through quite an upheaval in the recent past as a cloud of uncertainty loomed large over Russia's invasion of Ukraine and its subsequent repercussions, particularly on the oil price. However, Wall Street rebounded on Mar 24, buoyed by a spike in tech stocks and a dip witnessed in oil price ahead of a NATO meeting on the Russia-Ukraine crisis.
With world leaders tightening sanctions on Russia, the near-term fate of the stock market remains a bit turbulent. Amid such volatility, one might be inclined to choose safe stocks like AdvanSix, Quanex Building Products, Credicorp, Suncor Energy and Exxon Mobil, which bear low leverage.
Now one must know the concept of leverage and its importance in the investment world before choosing low-leverage stocks.
Notably, leverage is a well-known strategy in corporate finance, which refers to the use of borrowed capital by companies in their business operations. Although this borrowing can be done through equity or debt financing, statistically it has been observed that debt financing is preferred over equity by the majority of corporations.
This preference is probably due to the cheap and easy availability of debt over equity financing.
However, at times debt financing can be detrimental for a company's prospects, especially when a company bears too much debt compared to its assets. So, one should look for stocks that are not heavily burdened with debt.
So, the next step should be how to identify such stocks that are not overburdened with debt as a debt-free stock is almost impossible to find.
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.
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.
With the first-quarter earnings cycle ahead of us, 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.
Here are five of the 29 stocks that qualified the screening:
AdvanSix: It is a producer and supplier of Nylon 6 materials. ASIX announced its fourth-quarter 2021 results in February, with year-over-year sales growth of 45%. The company also announced it has agreed to acquire U.S. Amines, which is a leading North American producer of alkyl and specialty amines, for $100 million. This should strengthen AdvanSix's position in the chemical industry.
AdvanSix delivered an earnings surprise of 23.63%, on average, in the trailing four quarters and sports a Zacks Rank #1 currently. The Zacks Consensus Estimate for 2022 earnings has moved up 53% in the past 60 days.
Quanex Building Products: It designs and produces energy-efficient fenestration products in addition to kitchen and bath cabinet components. NX recently announced its first-quarter fiscal 2022 results, wherein its sales improved 16% year over year. This growth was driven by volume increases in the fenestration segments combined with higher prices related to the pass-through of raw material cost inflation.
Quanex Building Products currently carries a Zacks Rank #2. The company delivered an earnings surprise of 17.37% in the trailing four quarters, on average. The Zacks Consensus Estimate for 2022 earnings has moved up 3.2% in the past 60 days.
Credicorp: It is the largest financial services holding company in Peru with extensive experience in the Peruvian financial market. Its net interest income increased 19.8% year over year in fourth-quarter 2021, while the efficiency ratio expanded 230 basis points.
BAP carries a Zacks Rank of 2 and boasts a long-term earnings growth rate of 18.6%. The Zacks Consensus Estimate for 2022 earnings has moved up 9.6% in the past 60 days. You can see the complete list of today's Zacks #1 Rank stocks here.
Suncor Energy: It is a premier integrated energy company. Its operations include oil sands development and upgrade, conventional and offshore crude oil and gas production, petroleum refining, and product marketing. Suncor reported fourth-quarter 2021 adjusted operating earnings of 89 cents per share, reflecting an improvement from the adjusted operating loss of 7 cents incurred in the prior-year quarter.
Currently, Suncor has a Zacks Rank of 2. It boasts a long-term earnings growth rate of 13.8%. Its 2022 earnings estimate has improved 19.5% over the past 60 days.
Exxon Mobil: It is one of the world's largest publicly traded international oil and gas companies. Exxon Mobil announced its plans at its annual Investor Day this March to deliver industry-leading earnings, cash flow growth and shareholder returns, and lead in the energy transition across a range of lower-emissions scenarios. To improve future earnings, XOM is upgrading its portfolio with low-cost-of-supply opportunities by investing in advantaged assets, including Guyana and the U.S. Permian Basin.
Exxon Mobil currently sports a Zacks Rank #1. It delivered a four-quarter earnings surprise of 5.81%, on average. Its 2022 earnings estimate has improved 20.6% over the past 60 days.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1887381/want-to-invest-in-stocks-buy-these-5-low-leverage-equities
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.
Contact: Jim Giaquinto
Company: Zacks.com
Phone: 312-265-9268
Email: pr@zacks.com
Visit: https://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.