For Immediate Release
Chicago, IL – September 28, 2016 - Stocks in this week’s article include: Omega Protein Corporation (NYSE: -Free Report ), Comfort Systems USA Inc. (NYSE: (FIX - Free Report) -Free Report ), NTT DOCOMO, Inc. (NYSE: -Free Report ), BofI Holding, Inc. (NASDAQ: (BOFI - Free Report) -Free Report ) and Gentex Corp. (NASDAQ: (GNTX - Free Report) -Free Report ).
Screen of the Week of Zacks Investment Research:
Add These 5 Low Leverage Stocks to Protect Your Portfolio
Leverage, in particular financial leverage, is a commonly used term in everyday business. It refers to the amount of corporate debt individual companies bear. At the macro level, it is the cumulative public debt that ultimately determines a nation’s fiscal deficit and thereby its economic fate.
Debt financing is nothing new in the world of investment and only a fortunate few can escape it. No one voluntarily wishes to be a part of a debt-ridden nation as after all debt means carrying the burden of interest payments. Still, most companies resort to debt financing instead of equity financing, probably because debt is more easily and cheaply available.
In fact, in the majority of matured economies, the debt market is larger than the equity market in terms of market capitalization. In this context, it is imperative to mention the debt situation of the U.S. Yes, America – the richest economy in the world is the biggest borrower too. In fact, a fresh estimate from the Congressional Budget Office projects the country’s debt this year to spike 35% to $590 billion, compared to last year.
However, this should not dissuade investors from investing in stocks as debt has been a part of the U.S. economy since its foundation and yet the country stands atop others. Investors nevertheless need to choose wisely and select companies bearing lesser amount of debt.
This is where the significance of financial leverage ratio comes into play. This ratio measures the extent of financial leverage a company bears. Several leverage ratios have been developed for this purpose, with debt-to-equity ratio being the most popular among them.
Debt-to-Equity Ratio = Total Liabilities/Shareholders’ Equity
Debt-to-equity is a liquidity ratio that indicates the amount of financial risk a company bears. A higher debt-to-equity ratio indicates that the company uses more debt financing compared to equity financing, thereby investing in its stock could prove to be risky.
It is imperative that companies recording higher earnings growth will attract investors. But if they bear high leverage then they might not generate satisfactory returns. This is because at the time of economic downturns, debt ridden companies are more prone to become victims of a debt trap.
Choosing the Winning Strategy
Considering the above discussion, it is obvious that a sensible investor will go for stocks bearing low debt-to-equity ratios. However, choosing stocks based solely on one financial metric might not fetch the desired outcome.
To ensure the maximum possible return from this strategy, we have expanded our screening procedure to include some other criteria.
Here are the other parameters:
Debt/Equity less than X-Industry Median: Stocks that are less leveraged than their industry peers.
Current Price greater than or equal to 10: The stocks must be trading at a minimum of $10 or above.
Average 20-day Volume greater than or equal to 50000: A substantial trading volume ensures that the stock is easily tradable.
Percentage Change in EPS F(0)/F(-1) greater than X-Industry Median: Earnings growth adds to optimism, leading to a stock’s price appreciation.
Estimated One-Year EPS Growth F(1)/F(0) greater than 5: This shows earnings growth expectation.
Zacks Rank #1 (Strong Buy) or #2 (Buy): No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have a proven history of success.
VGM Score of A or B: Our research shows that stocks with a VGM Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or 2 offer the best upside potential
Excluding stocks that have a negative or a zero debt-to-equity ratio, here are five of the final 14 stocks that made it through the screen.
Omega Protein Corporation (NYSE: -Free Report ) : This renowned producer of a custom line of omega-3 fish oil, protein-rich specialty fish meal and organic fish solubles currently sports a Zacks Rank #1. It witnessed a 25.7% improvement in its current year consensus estimate in the last 60 days.
Comfort Systems USA Inc. (NYSE: (FIX - Free Report) -Free Report ) : This company offers installation, repair and replacement services for the mechanical services industry and currently carries a Zacks Rank #2. The company witnessed a 3% rise in its current year consensus estimate in the last 30 days.
NTT DOCOMO, Inc. (NYSE: -Free Report ) : This Japanese company is a predominant mobile phone operator in the nation. The current year consensus estimate for DOCOMO was up 22.9% in the last 30 days. The company carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here .
BofI Holding, Inc. (NASDAQ: (BOFI - Free Report) -Free Report ) : This is a holding company for BofI Federal Bank that provides consumer and business banking products in the U.S. It carries a Zacks Rank #2 and witnessed an average positive earnings surprise of 2.96% in the trailing four quarters.
Gentex Corp. (NASDAQ: (GNTX - Free Report) -Free Report ) : This manufacturer of automatic-dimming rearview mirrors and electronics carries a Zacks Rank #2 and recorded a positive earnings surprise of 3.45% in the last quarter.
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 .
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.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance .
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here https://at.zacks.com/?id=112
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros.
Get the full Report on OME - FREE
Get the full Report on FIX - FREE
Get the full Report on DCM - FREE
Get the full Report on BOFI - FREE
Get the full Report on GNTX - FREE
Follow us on Twitter: https://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
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.