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Scoop Up These 4 Stocks with Amazing Interest Coverage Ratios
An ill-informed investor can lose cash if he wagers on a stock only on the basis of the numbers flashing on a real-time stock screen. A critical analysis of the company’s financial background is always required for a better investment decision, especially at a time when the stock market is juggling myriad issues, such as soaring inflation, supply chain bottlenecks and a hawkish monetary policy.
Often, investors evaluate a company’s performance by simply looking at its sales and earnings, which sometimes do not reveal the real picture. To be more precise, they do not tell whether a company’s fundamentals are sound enough to meet its financial obligations. Here, the coverage ratio comes into play — the higher the metric, the more efficient an enterprise will be in meeting its financial obligations.
Why Interest Coverage Ratio?
The interest coverage ratio is used to determine how effectively a company can pay interest charges on its debt.
Debt, which is crucial to financing operations for the majority of companies, comes at a cost called interest. Interest expense has a direct bearing on the profitability of a company. The company’s creditworthiness depends on how effectively it meets its interest obligations. Therefore, Interest Coverage Ratio is one of the important criteria to factor in before making any investment decision.
Interest Coverage Ratio = Earnings before Interest & Taxes (EBIT) divided by Interest Expense.
Interest Coverage Ratio suggests how many times the interest could be paid from earnings and gauges the margin of safety a firm has for paying interest.
An interest coverage ratio lower than one suggests that the company is unable to fulfill its interest obligations and could default on repaying debt. A company capable of generating earnings well above its interest expense can withstand financial hardships. One should also track the company’s past performance to determine whether the interest coverage ratio has improved or worsened over a period of time.
Stride, Inc., BellRing Brands, Inc., Linde plc and AMETEK, Inc. boast of impressive interest coverage ratios.
Here are four of the nine stocks that qualified the screening:
Stride, a technology-based education company, sports a Zacks Rank #1 and has a VGM Score of A. The expected EPS growth rate for three-five years is 20%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Stride’s current financial year sales and EPS suggests growth of 7.8% and 11.9%, respectively, from the year-ago period. LRN delivered an earnings surprise of 20.4% in the last reported quarter. The stock has jumped 4.5% in the past year.
BellRing Brands, which provides various nutrition products, carries a Zacks Rank #2 and has a VGM Score of B. The expected EPS growth rate for three-five years is 13.6%.
The Zacks Consensus Estimate for BellRing Brands’ current financial year sales and EPS suggests growth of 19.5% and 9.5%, respectively, from the year-ago period. BellRing Brands has a trailing four-quarter earnings surprise of 11.7%, on average. The stock has rallied 39.1% in the past year.
Linde, which operates as an industrial gas company, carries a Zacks Rank #2 and has a VGM Score of B. The expected EPS growth rate for three-five years is 10%.
The Zacks Consensus Estimate for Linde’s current financial year sales and EPS suggests growth of 2.6% and 12.2%, respectively, from the year-ago period. Linde has a trailing four-quarter earnings surprise of 6.9%, on average. The stock has gained 12.1% in the past year.
AMETEK, which manufactures and sells electronic instruments and electromechanical devices, carries a Zacks Rank #2 and has a VGM Score of B. The expected EPS growth rate for three-five years is 9%.
The Zacks Consensus Estimate for AMETEK’s current financial year sales and EPS suggests growth of 8.1% and 7.6%, respectively, from the year-ago period. AMETEK has a trailing four-quarter earnings surprise of 5.5%, on average. The stock has risen 23.7% in the past year.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and backtest them first before taking the investment plunge.
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.
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 Stride, BellRing, Linde and AMETEK
For Immediate Release
Chicago, IL – May 25, 2023 – Stocks in this week’s article are Stride, Inc. (LRN - Free Report) , BellRing Brands, Inc. (BRBR - Free Report) , Linde plc (LIN - Free Report) and AMETEK, Inc. (AME - Free Report) .
Scoop Up These 4 Stocks with Amazing Interest Coverage Ratios
An ill-informed investor can lose cash if he wagers on a stock only on the basis of the numbers flashing on a real-time stock screen. A critical analysis of the company’s financial background is always required for a better investment decision, especially at a time when the stock market is juggling myriad issues, such as soaring inflation, supply chain bottlenecks and a hawkish monetary policy.
Often, investors evaluate a company’s performance by simply looking at its sales and earnings, which sometimes do not reveal the real picture. To be more precise, they do not tell whether a company’s fundamentals are sound enough to meet its financial obligations. Here, the coverage ratio comes into play — the higher the metric, the more efficient an enterprise will be in meeting its financial obligations.
Why Interest Coverage Ratio?
The interest coverage ratio is used to determine how effectively a company can pay interest charges on its debt.
Debt, which is crucial to financing operations for the majority of companies, comes at a cost called interest. Interest expense has a direct bearing on the profitability of a company. The company’s creditworthiness depends on how effectively it meets its interest obligations. Therefore, Interest Coverage Ratio is one of the important criteria to factor in before making any investment decision.
Interest Coverage Ratio = Earnings before Interest & Taxes (EBIT) divided by Interest Expense.
Interest Coverage Ratio suggests how many times the interest could be paid from earnings and gauges the margin of safety a firm has for paying interest.
An interest coverage ratio lower than one suggests that the company is unable to fulfill its interest obligations and could default on repaying debt. A company capable of generating earnings well above its interest expense can withstand financial hardships. One should also track the company’s past performance to determine whether the interest coverage ratio has improved or worsened over a period of time.
Stride, Inc., BellRing Brands, Inc., Linde plc and AMETEK, Inc. boast of impressive interest coverage ratios.
Here are four of the nine stocks that qualified the screening:
Stride, a technology-based education company, sports a Zacks Rank #1 and has a VGM Score of A. The expected EPS growth rate for three-five years is 20%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Stride’s current financial year sales and EPS suggests growth of 7.8% and 11.9%, respectively, from the year-ago period. LRN delivered an earnings surprise of 20.4% in the last reported quarter. The stock has jumped 4.5% in the past year.
BellRing Brands, which provides various nutrition products, carries a Zacks Rank #2 and has a VGM Score of B. The expected EPS growth rate for three-five years is 13.6%.
The Zacks Consensus Estimate for BellRing Brands’ current financial year sales and EPS suggests growth of 19.5% and 9.5%, respectively, from the year-ago period. BellRing Brands has a trailing four-quarter earnings surprise of 11.7%, on average. The stock has rallied 39.1% in the past year.
Linde, which operates as an industrial gas company, carries a Zacks Rank #2 and has a VGM Score of B. The expected EPS growth rate for three-five years is 10%.
The Zacks Consensus Estimate for Linde’s current financial year sales and EPS suggests growth of 2.6% and 12.2%, respectively, from the year-ago period. Linde has a trailing four-quarter earnings surprise of 6.9%, on average. The stock has gained 12.1% in the past year.
AMETEK, which manufactures and sells electronic instruments and electromechanical devices, carries a Zacks Rank #2 and has a VGM Score of B. The expected EPS growth rate for three-five years is 9%.
The Zacks Consensus Estimate for AMETEK’s current financial year sales and EPS suggests growth of 8.1% and 7.6%, respectively, from the year-ago period. AMETEK has a trailing four-quarter earnings surprise of 5.5%, on average. The stock has risen 23.7% in the past year.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and backtest them first before taking the investment plunge.
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/2099132/scoop-up-these-4-stocks-with-amazing-interest-coverage-ratio
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.
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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.