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Buy These 5 Low Leverage Stocks Ahead of Big Earnings Releases
Wall Street stocks had quite a roller-coaster ride on Monday, with the market awaiting the earnings releases of some of the big technology companies this week.
Though the overall market situation is still volatile to some extent, investors must not feel dissuaded from choosing stocks but should definitely progress with caution. So, we recommend stocks like Marcus Corp., AssetMark Financial, Humana, Riely Exploration Permian and ICF International, which bear low leverage and therefore can shield investors from incurring losses in times of crisis.
Now, before selecting low-leverage stocks, let’s explore what leverage is and how choosing a low-leverage stock helps investors.
In finance, leverage is a term used to denote the practice of borrowing capital by companies to run their operations smoothly and expand the same. Such borrowings are done through debt financing. But there remains an option for equity finance. This is probably due to the cheap and easy availability of debt over equity financing.
However, debt financing has its 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 avoid companies that resort to exorbitant debt financing.
Therefore, the crux of safe investment lies in choosing a company that is not burdened with debt, as a debt-free stock is almost impossible to find.
Such an event shows how volatile the equity market can be at times and as an investor if you don’t want to lose big time, we suggest you invest in stocks, which bear low leverage and are hence less risky.
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 lower debt-to-equity ratio reflects improved solvency for a company.
With the first-quarter earnings cycle ongoing, 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 downturn, its so-called booming earnings picture might turn into a nightmare.
The Winning Strategy
Considering the aforementioned factors, it is prudent to choose stocks with a low debt-to-equity ratio to ensure steady returns.
Yet, an investment strategy based solely on the debt-to-equity ratio might not fetch the desired outcome. To choose stocks that have the potential to give you steady returns, we have expanded our screening criteria to include some other factors.
Excluding stocks that have a negative or a zero debt-to-equity ratio, here we present our five picks out of the 12 stocks that made it through the screen.
Marcus Corp.: It engages in the lodging and entertainment industries. On Mar 2, 2023, the company reported its fourth-quarter and full-year fiscal 2022 results. Marcus’ total revenues for the fiscal fourth quarter were $162.9 million, reflecting a 3.6% decrease from the fourth quarter of fiscal 2021.
MCS delivered an earnings surprise of 64.15%, on average, in the trailing four quarters. It carries a Zacks Rank #2 currently. The Zacks Consensus Estimate for 2023 sales implies a 10.6% improvement from the 2022 reported figure.
AssetMark Financial: It provides wealth management and technology solutions to financial advisers and their clients. On Apr 10, 2023, AssetMark Financial announced its AssetMark Monthly Knowledge” Report. Per the report, AMK’s platform assets of $96.2 billion at the end of March were up 5.9% year over year, while net flows were $744 million, down 5.9% year over year.
AMK currently carries a Zacks Rank #2. The company delivered an earnings surprise of 7.95% in the last reported quarter. The Zacks Consensus Estimate for 2023 sales suggests a 20.7% improvement year over year.
Humana: It is one of the largest health care plan providers in the United States, offering health insurance benefits under Health Maintenance Organization, Private Fee-For-Service and Preferred Provider Organization plans. On Apr 3, 2023, Humana released its annual and sustainability report. Per the report, HUM’s occupancy levels among its operations and profitability increased in 2022.
HUM carries a Zacks Rank #2 and delivered an earnings surprise of 12.95%, on average, in the trailing four quarters. The Zacks Consensus Estimate for 2023 sales indicates an 11.1% improvement from the 2022 figure. You can see the complete list of today’s Zacks #1 Rank stocks here.
Riley Exploration Permian: It is an independent oil and natural gas company, which is involved in the acquisition, exploration, development and production of oil, natural gas, and natural gas liquids principally in the Permian Basin. On Apr 4, 2023, REPX announced that it completed its previously announced acquisition of New Mexico oil and natural gas assets from Pecos Oil & Gas, LLC, an affiliate of Cibolo Energy Partners LLC.
REPX currently sports a Zacks Rank #1. It delivered a four-quarter earnings surprise of 12.68%, on average. The Zacks Consensus Estimate for 2023 sales suggests a 35.4% improvement from the 2022 reported figure.
ICF International: It is a provider of professional services and technology-based solutions to government and commercial clients. On Apr 13, 2023, ICF International announced that it has won a contract worth $18 million to provide environmental compliance services from the Los Angeles County Metropolitan Transportation Authority (Metro). Per the terms of the contract, ICF will combine its deep environmental expertise and advanced technology and analytics capabilities to help Metro reach its vision of transforming the future of mobility in Los Angeles County.
ICFI currently sports a Zacks Rank #1. It delivered a four-quarter earnings surprise of 9.21%, on average. The Zacks Consensus Estimate for 2023 sales suggests a 10.6% improvement from the 2022 reported figure.
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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
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Zacks.com featured highlights Marcus, AssetMark Financial, Humana, Riely Exploration Permian and ICF International
For Immediate Release
Chicago, IL – April 26, 2023 – Stocks in this week’s article are Marcus Corp. (MCS - Free Report) , AssetMark Financial (AMK - Free Report) , Humana (HUM - Free Report) , Riely Exploration Permian (REPX - Free Report) and ICF International (ICFI - Free Report) .
Buy These 5 Low Leverage Stocks Ahead of Big Earnings Releases
Wall Street stocks had quite a roller-coaster ride on Monday, with the market awaiting the earnings releases of some of the big technology companies this week.
Though the overall market situation is still volatile to some extent, investors must not feel dissuaded from choosing stocks but should definitely progress with caution. So, we recommend stocks like Marcus Corp., AssetMark Financial, Humana, Riely Exploration Permian and ICF International, which bear low leverage and therefore can shield investors from incurring losses in times of crisis.
Now, before selecting low-leverage stocks, let’s explore what leverage is and how choosing a low-leverage stock helps investors.
In finance, leverage is a term used to denote the practice of borrowing capital by companies to run their operations smoothly and expand the same. Such borrowings are done through debt financing. But there remains an option for equity finance. This is probably due to the cheap and easy availability of debt over equity financing.
However, debt financing has its 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 avoid companies that resort to exorbitant debt financing.
Therefore, the crux of safe investment lies in choosing a company that is not burdened with debt, as a debt-free stock is almost impossible to find.
Such an event shows how volatile the equity market can be at times and as an investor if you don’t want to lose big time, we suggest you invest in stocks, which bear low leverage and are hence less risky.
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 lower debt-to-equity ratio reflects improved solvency for a company.
With the first-quarter earnings cycle ongoing, 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 downturn, its so-called booming earnings picture might turn into a nightmare.
The Winning Strategy
Considering the aforementioned factors, it is prudent to choose stocks with a low debt-to-equity ratio to ensure steady returns.
Yet, an investment strategy based solely on the debt-to-equity ratio might not fetch the desired outcome. To choose stocks that have the potential to give you steady returns, we have expanded our screening criteria to include some other factors.
Excluding stocks that have a negative or a zero debt-to-equity ratio, here we present our five picks out of the 12 stocks that made it through the screen.
Marcus Corp.: It engages in the lodging and entertainment industries. On Mar 2, 2023, the company reported its fourth-quarter and full-year fiscal 2022 results. Marcus’ total revenues for the fiscal fourth quarter were $162.9 million, reflecting a 3.6% decrease from the fourth quarter of fiscal 2021.
MCS delivered an earnings surprise of 64.15%, on average, in the trailing four quarters. It carries a Zacks Rank #2 currently. The Zacks Consensus Estimate for 2023 sales implies a 10.6% improvement from the 2022 reported figure.
AssetMark Financial: It provides wealth management and technology solutions to financial advisers and their clients. On Apr 10, 2023, AssetMark Financial announced its AssetMark Monthly Knowledge” Report. Per the report, AMK’s platform assets of $96.2 billion at the end of March were up 5.9% year over year, while net flows were $744 million, down 5.9% year over year.
AMK currently carries a Zacks Rank #2. The company delivered an earnings surprise of 7.95% in the last reported quarter. The Zacks Consensus Estimate for 2023 sales suggests a 20.7% improvement year over year.
Humana: It is one of the largest health care plan providers in the United States, offering health insurance benefits under Health Maintenance Organization, Private Fee-For-Service and Preferred Provider Organization plans. On Apr 3, 2023, Humana released its annual and sustainability report. Per the report, HUM’s occupancy levels among its operations and profitability increased in 2022.
HUM carries a Zacks Rank #2 and delivered an earnings surprise of 12.95%, on average, in the trailing four quarters. The Zacks Consensus Estimate for 2023 sales indicates an 11.1% improvement from the 2022 figure. You can see the complete list of today’s Zacks #1 Rank stocks here.
Riley Exploration Permian: It is an independent oil and natural gas company, which is involved in the acquisition, exploration, development and production of oil, natural gas, and natural gas liquids principally in the Permian Basin. On Apr 4, 2023, REPX announced that it completed its previously announced acquisition of New Mexico oil and natural gas assets from Pecos Oil & Gas, LLC, an affiliate of Cibolo Energy Partners LLC.
REPX currently sports a Zacks Rank #1. It delivered a four-quarter earnings surprise of 12.68%, on average. The Zacks Consensus Estimate for 2023 sales suggests a 35.4% improvement from the 2022 reported figure.
ICF International: It is a provider of professional services and technology-based solutions to government and commercial clients. On Apr 13, 2023, ICF International announced that it has won a contract worth $18 million to provide environmental compliance services from the Los Angeles County Metropolitan Transportation Authority (Metro). Per the terms of the contract, ICF will combine its deep environmental expertise and advanced technology and analytics capabilities to help Metro reach its vision of transforming the future of mobility in Los Angeles County.
ICFI currently sports a Zacks Rank #1. It delivered a four-quarter earnings surprise of 9.21%, on average. The Zacks Consensus Estimate for 2023 sales suggests a 10.6% improvement from the 2022 reported figure.
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/2084023/buy-these-5-low-leverage-stocks-ahead-of-big-earnings-releases
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 >>.
Follow us on Twitter: https://www.twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch
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.