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5 Low Leverage Stocks to Buy Amid Mixed Investor Sentiment
Major U.S. stock indices witnessed turmoil on Jan 5, ending with a marginal rise. This was most likely due to mixed sentiments among investors about the latest macroeconomic data, which offered conflicting perspectives on the timing of potential interest rate cuts.
In such a situation, an investor might not feel confident enough to invest in the stock market. However, a prudent investor knows that this is the right time to buy stocks that are safe bets. To this end, we recommend stocks likeLive Oak Bancshares, Marriott International, Cardinal Health, Fabrinet and Wingstop, all of which have low leverage. Choosing them can shield investors from incurring huge 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.
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.
The equity market can be volatile at times, and, as an investor, if you don't want to lose big time, we suggest you invest in stocks that 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 fourth-quarter earnings season knocking on the doors, 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.
Excluding stocks that have a negative or a zero debt-to-equity ratio, here we present our five picks out of the 13 stocks that made it through the screen.
Live Oak Bancshares: It is the parent and registered bank holding company of Live Oak Banking Company, which offers an online platform for small business lending. On Nov 20, 2023, it was announced that Live Oak Bank had been named the most active SBA 7(a) lender by dollar amount by the U.S. Small Business Administration for the sixth year in a row.
LOB delivered an earnings surprise of 79.59% in the last reported quarter. It sports a Zacks Rank #1 currently. The Zacks Consensus Estimate for fourth-quarter 2023 sales suggests a 14.1% improvement from the fourth-quarter 2022 reported figure.
Marriott International: The company is a leading worldwide hospitality company focused on lodging management and franchising. On Nov 9, 2023, Marriott International announced that its board of directors increased the authorization to repurchase the company's Class A common stock by an additional 25 million shares, which are in addition to the approximately 7.3 million shares that were available as of Oct 31, 2023, for repurchase under prior authorizations. This reflects the company's solid cash position.
MAR currently carries a Zacks Rank #2. The company holds a solid long-term earnings growth rate of 17.4%. The Zacks Consensus Estimate for 2023 earnings suggests a 15.2% improvement year over year.
Cardinal Health: It is a drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. On Nov 9, 2023, Cardinal Health announced the U.S. launch of its SmartGown EDGE Breathable Surgical Gown with ASSIST Instrument Pockets, created to provide surgical teams safe and convenient instrument access in the operating room. This launch should bolster Cardinal Health's footprint in the medical equipment industry.
CAH currently carries a Zacks Rank #2. The company boasts a long-term earnings growth rate of 15.3%. The Zacks Consensus Estimate for CAH's fiscal 2024 sales indicates an improvement of 13.9% from the fiscal 2023 reported figure. You can see the complete list of today's Zacks #1 Rank stocks here.
Fabrinet: It provides precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products, such as optical communication components, modules and sub-systems, industrial lasers and sensors. On Nov 6, 2023, Fabrinet announced its financial results for first-quarter fiscal 2024. Its fiscal first quarter revenues of $685.5 million improved a solid 4.6% from the prior year quarter's reported figure.
FN currently carries a Zacks Rank #2. The company currently holds an average four-quarter earnings surprise of 3.37%. The Zacks Consensus Estimate for FN's fiscal 2024 sales suggests a 10% improvement from the fiscal 2023 reported figure.
Wingstop: It franchises and operates restaurants. On Nov 1, 2023, the company announced financial results for fiscal third-quarter 2023. Its system-wide sales increased 26.5% to $885 million.
WING currently carries a Zacks Rank #2. The company boasts a long-term earnings growth rate of 21.8%. The Zacks Consensus Estimate for WING's fiscal 2024 sales suggests a 26.3% improvement from the 2022 reported figure.
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. 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/performancefor information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
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Zacks.com featured highlights include Live Oak Bancshares, Marriott International, Cardinal Health, Fabrinet and Wingstop
For Immediate Release
Chicago, IL – January 9, 2024 – Stocks in this week’s article are Live Oak Bancshares (LOB - Free Report) , Marriott International (MAR - Free Report) , Cardinal Health (CAH - Free Report) , Fabrinet (FN - Free Report) and Wingstop (WING - Free Report) .
5 Low Leverage Stocks to Buy Amid Mixed Investor Sentiment
Major U.S. stock indices witnessed turmoil on Jan 5, ending with a marginal rise. This was most likely due to mixed sentiments among investors about the latest macroeconomic data, which offered conflicting perspectives on the timing of potential interest rate cuts.
In such a situation, an investor might not feel confident enough to invest in the stock market. However, a prudent investor knows that this is the right time to buy stocks that are safe bets. To this end, we recommend stocks likeLive Oak Bancshares, Marriott International, Cardinal Health, Fabrinet and Wingstop, all of which have low leverage. Choosing them can shield investors from incurring huge 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.
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.
The equity market can be volatile at times, and, as an investor, if you don't want to lose big time, we suggest you invest in stocks that 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 fourth-quarter earnings season knocking on the doors, 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.
Excluding stocks that have a negative or a zero debt-to-equity ratio, here we present our five picks out of the 13 stocks that made it through the screen.
Live Oak Bancshares: It is the parent and registered bank holding company of Live Oak Banking Company, which offers an online platform for small business lending. On Nov 20, 2023, it was announced that Live Oak Bank had been named the most active SBA 7(a) lender by dollar amount by the U.S. Small Business Administration for the sixth year in a row.
LOB delivered an earnings surprise of 79.59% in the last reported quarter. It sports a Zacks Rank #1 currently. The Zacks Consensus Estimate for fourth-quarter 2023 sales suggests a 14.1% improvement from the fourth-quarter 2022 reported figure.
Marriott International: The company is a leading worldwide hospitality company focused on lodging management and franchising. On Nov 9, 2023, Marriott International announced that its board of directors increased the authorization to repurchase the company's Class A common stock by an additional 25 million shares, which are in addition to the approximately 7.3 million shares that were available as of Oct 31, 2023, for repurchase under prior authorizations. This reflects the company's solid cash position.
MAR currently carries a Zacks Rank #2. The company holds a solid long-term earnings growth rate of 17.4%. The Zacks Consensus Estimate for 2023 earnings suggests a 15.2% improvement year over year.
Cardinal Health: It is a drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. On Nov 9, 2023, Cardinal Health announced the U.S. launch of its SmartGown EDGE Breathable Surgical Gown with ASSIST Instrument Pockets, created to provide surgical teams safe and convenient instrument access in the operating room. This launch should bolster Cardinal Health's footprint in the medical equipment industry.
CAH currently carries a Zacks Rank #2. The company boasts a long-term earnings growth rate of 15.3%. The Zacks Consensus Estimate for CAH's fiscal 2024 sales indicates an improvement of 13.9% from the fiscal 2023 reported figure. You can see the complete list of today's Zacks #1 Rank stocks here.
Fabrinet: It provides precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products, such as optical communication components, modules and sub-systems, industrial lasers and sensors. On Nov 6, 2023, Fabrinet announced its financial results for first-quarter fiscal 2024. Its fiscal first quarter revenues of $685.5 million improved a solid 4.6% from the prior year quarter's reported figure.
FN currently carries a Zacks Rank #2. The company currently holds an average four-quarter earnings surprise of 3.37%. The Zacks Consensus Estimate for FN's fiscal 2024 sales suggests a 10% improvement from the fiscal 2023 reported figure.
Wingstop: It franchises and operates restaurants. On Nov 1, 2023, the company announced financial results for fiscal third-quarter 2023. Its system-wide sales increased 26.5% to $885 million.
WING currently carries a Zacks Rank #2. The company boasts a long-term earnings growth rate of 21.8%. The Zacks Consensus Estimate for WING's fiscal 2024 sales suggests a 26.3% improvement from the 2022 reported figure.
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/2206785/5-low-leverage-stocks-to-buy-amid-mixed-investor-sentiments
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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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/performancefor information about the performance numbers displayed in this press release.