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Zacks.com featured highlights: KB Home, Dave & Buster's Entertainment, Packaging Corporation of America, Time Warner and Carnival Corporation

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For Immediate Release

Chicago, IL –August 02, 2017 - Stocks in this week’s article include KB Home (NYSE:KBH Free Report), Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY Free Report), Packaging Corporation of America (NYSE:PKG Free Report), Time Warner Inc. (NYSE:TWX Free Report) and Carnival Corporation (NYSE:CCL Free Report).

5 Stocks with Exciting Interest Coverage Ratio

A layman can end up losing money if he decides to pick a stock only on the basis of numbers flashing on a real-time stock screen. A critical analysis of the company’s financial background is essential for a better investment decision.

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 role of coverage ratios comes into play — the higher these are the more efficient an enterprise will be in meeting its financial obligations.

Why Interest Coverage Ratio?

Interest Coverage Ratio is used to determine how effectively a company can pay the interest charges on its debt.

Debt, which is crucial to financing operations for a majority of companies, comes at a cost called interest. Interest expense has a direct bearing on the profitability of a company. And 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.

The Interest Coverage Ratio suggests how many times the interest could be paid from earnings and also 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 that is capable of generating earnings well above its interest expense can withstand financial hardships. Definitely 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.

The Winning Strategy

Apart from having an Interest Coverage ratio that is more than the industry average, adding a favorable Zacks Rank and a VGM Score of “A” or “B” to your search criteria should lead to better results.

Interest Coverage Ratio greater than X-Industry Median

Price greater than or equal to 5:The stocks must all be trading at a minimum of $5 or higher.

5-Year Historical EPS Growth (%) greater than X-Industry Median:Stocks that have a strong EPS growth history.

Projected EPS Growth (%) greater than X-Industry Median: This is the projected EPS growth over the next three to five years. This shows that the stock has near-term earnings growth potential.

Average 20-Day Volume greater than 100,000:A substantial trading volume ensures that the stock is easily tradable.

Zacks Rank less than or equal to 2:Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known to outperform irrespective of the market environment.

VGM Score of less than or equal to 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.

Here are five of the 20 stocks that qualified the screening:

KB Home (NYSE:KBHFree Report), which operates as a homebuilding company, has a VGM score of “B” and an expected EPS growth rate of 16.7% for 3–5 years. The stock currently flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dave & Buster's Entertainment, Inc. (NASDAQ:PLAYFree Report), which owns and operates entertainment and dining venues, has a VGM score of “A” and a Zacks Rank #2. Its expected EPS growth rate for 3–5 years is pegged at 16.5%.

Packaging Corporation of America (NYSE:PKGFree Report), which manufactures and sells containerboard and corrugated packaging products, has a VGM score of “A” and an expected EPS growth rate 13% for 3–5 years. The stock currently carries a Zacks Rank #2.

Time Warner Inc. (NYSE:TWXFree Report), which operates as a media and entertainment company, has a VGM score of “B” and an expected EPS growth rate of 9.5% for 3–5 years. The stock carries a Zacks Rank #2.

Carnival Corporation (NYSE:CCLFree Report), a leisure travel and cruise company, has a Zacks Rank #2 and a VGM score of “A.” The expected EPS growth rate for 3–5 years is currently 13.7%.

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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.

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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 https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.



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