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Zacks Investment Ideas feature highlights: Ethan Allen Interiors, Paychex and Arista Networks

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For Immediate Release

Chicago, IL – January 26, 2023 – Today, Zacks Investment Ideas feature highlights Ethan Allen Interiors Inc. (ETD - Free Report) , Paychex Inc. (PAYX - Free Report) and Arista Networks (ANET - Free Report) .

3 Companies Boasting Strong Balance Sheets

The extensive list of stocks investors can choose from can undoubtedly become overwhelming, leaving them unsure where to park their hard-earned cash.

However, targeting companies with favorable balance sheet characteristics, such as a low debt load, can help filter out bad apples.

Debt can limit a company's flexibility and ability to invest in growth opportunities, including R&D, tapping into new markets, or even hiring more talent.

And, of course, when a company's debt load is heavy, it becomes more vulnerable to economic downturns or other forces that could negatively impact business.

Three companies with a light debt load –Ethan Allen Interiors Inc., Paychex Inc. and Arista Networks – could all be considered.

Ethan Allen Interiors Inc.

Ethan Allen Interiors is a leader in interior design, selling a full range of home furnishings through a retail network of design centers and its online website. The company has a clean balance sheet with zero total debt and cash and equivalents of $142 million as of its latest quarter.

ETD's 27.5% TTM return on equity (ROE) is impressive, well above the Zacks Retail and Wholesale sector average of 16.3%.

ETD's high ROE shows that the company has successfully generated profits from existing assets, undoubtedly a positive signal.

Paychex Inc.

Paychex is a recognized leader in the payroll, human resource, and benefits outsourcing industry. PAYX's earnings outlook has drifted higher over the last several months, pushing it into a Zacks Rank #2 (Buy).

The company exited its latest quarter with $1.3 billion in cash and roughly $875 million in total debt, indicating an advantageous ability to wipe out obligations easily. 

In addition, PAYX's 45.5% TTM ROE is well above its Zacks Business Services sector average of 18.5%.

Arista Networks

Arista Networks provides cloud networking solutions for data centers and cloud computing environments. The company exited its latest quarter with $3.4 billion in cash and equivalents and total debt of a mere $57 million.

Further, the company has had little issue exceeding quarterly estimates, surpassing the Zacks Consensus EPS Estimate by double-digit percentages in back-to-back quarters.

In its latest release, ANET beat the Zacks Consensus EPS Estimate by nearly 20% and reported revenue 11% above expectations.

Bottom Line

Companies reflecting favorable balance sheet characteristics are attractive investments, as these companies are better equipped to weather negative business or economic developments.

All three companies above – Ethan Allen, Paychex and Arista Networks – carry a very manageable debt load paired with a solid cash pile.

For those that like to target companies less vulnerable to downturns, all three deserve a watchlist spot.

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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 information about the performance numbers displayed in this press release.

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Paychex, Inc. (PAYX) - free report >>

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