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4 Stocks With Solid Interest Coverage to Navigate the 2026 Market
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Key Takeaways
AMZN, CAH, LRN and EAT show high interest coverage ratios, signaling a solid financial footing for 2026.
Stride's EPS and sales are forecast to grow 3.1% and 4.6% despite a 35.9% stock drop this year.
Cardinal Health's EPS and sales are projected to grow 19.7% and 16.2%, with the stock up 75.3% in 2025.
Equity markets entered the final week of 2025 with a cautious note on Monday, as major U.S. indices retreated from recent highs. The Dow Jones Industrial Average shed 249.04 points, or 0.51%, to close at 48,461.93, while the S&P 500 and Nasdaq Composite echoed this downward trend. The S&P 500 fell 24.20 points or 0.35% to 6,905.74. The Nasdaq Composite slipped 118.75 or 0.50% to 23,474.35.
The commodities sector mirrored the equity market's volatility, particularly in precious metals, where a sharp reversal was seen. Gold and silver saw a sharp pullback in prices.
Despite these hiccups, market pundits remain optimistic for 2026. Analysts anticipate that a combination of tax incentives, capital investment in AI and easing monetary policy will continue to sustain corporate growth.
As interest rate decisions come into sharper focus, the interest coverage ratio — a key measure of a company’s ability to meet its debt obligations — gains renewed importance. A higher ratio signals that a company is more capable of meeting its financial commitments.
Relying solely on stock price movements without understanding the company’s fundamentals can cause investors to lose money. Investors must carefully review a company's financial health to make informed decisions, especially in today’s unpredictable market. While sales and earnings are often the go-to metrics, they can sometimes be misleading and may not show whether a company has the financial strength to cover its obligations. This is where the coverage ratio holds the key.
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, the 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 gauges the margin of safety a firm has for paying interest.
An interest coverage ratio lower than 1 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 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 with 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 four of the 12 stocks that qualified the screening:
Stride, a technology-based education company, carries a Zacks Rank #2 and has a VGM Score of B. LRN has a trailing four-quarter earnings surprise of 12.1%, on average. 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 indicates growth of 4.6% and 3.1%, respectively, from the year-ago period. The stock has plummeted 35.9% in the past year.
Brinker International, one of the leading casual dining restaurant companies, carries a Zacks Rank #2 and has a VGM Score of A. The company has a trailing four-quarter earnings surprise of 18.7%, on average.
The Zacks Consensus Estimate for Brinker International’s current financial-year sales and EPS calls for growth of 6.5% and 14.9%, respectively, from the year-ago period. The stock has advanced 8.3% in the past year.
Amazon, a multinational technology and e-commerce company, carries a Zacks Rank #2 and has a VGM Score of B. AMZN has a trailing four-quarter earnings surprise of 22.5%, on average.
The Zacks Consensus Estimate for Amazon’s current financial-year sales and EPS implies growth of 11.9% and 29.7%, respectively, from the year-ago period. The stock has risen 5.8% in the past year.
Cardinal Health, a global healthcare company that distributes pharmaceuticals, manufactures and supplies medical and laboratory products, carries a Zacks Rank #2 and has a VGM Score of A. CAH has a trailing four-quarter earnings surprise of 9.4%, on average.
The Zacks Consensus Estimate for Cardinal Health’s current financial-year sales and EPS indicates growth of 16.2% and 19.7%, respectively, from the year-ago period. The stock has soared 75.3% 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 back test 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.
Image: Bigstock
4 Stocks With Solid Interest Coverage to Navigate the 2026 Market
Key Takeaways
Equity markets entered the final week of 2025 with a cautious note on Monday, as major U.S. indices retreated from recent highs. The Dow Jones Industrial Average shed 249.04 points, or 0.51%, to close at 48,461.93, while the S&P 500 and Nasdaq Composite echoed this downward trend. The S&P 500 fell 24.20 points or 0.35% to 6,905.74. The Nasdaq Composite slipped 118.75 or 0.50% to 23,474.35.
The commodities sector mirrored the equity market's volatility, particularly in precious metals, where a sharp reversal was seen. Gold and silver saw a sharp pullback in prices.
Despite these hiccups, market pundits remain optimistic for 2026. Analysts anticipate that a combination of tax incentives, capital investment in AI and easing monetary policy will continue to sustain corporate growth.
As interest rate decisions come into sharper focus, the interest coverage ratio — a key measure of a company’s ability to meet its debt obligations — gains renewed importance. A higher ratio signals that a company is more capable of meeting its financial commitments.
Relying solely on stock price movements without understanding the company’s fundamentals can cause investors to lose money. Investors must carefully review a company's financial health to make informed decisions, especially in today’s unpredictable market. While sales and earnings are often the go-to metrics, they can sometimes be misleading and may not show whether a company has the financial strength to cover its obligations. This is where the coverage ratio holds the key.
Stride, Inc. (LRN - Free Report) , Brinker International, Inc. (EAT - Free Report) , Amazon.com, Inc. (AMZN - Free Report) , and Cardinal Health, Inc. (CAH - Free Report) boast impressive interest coverage ratios.
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, the 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 gauges the margin of safety a firm has for paying interest.
An interest coverage ratio lower than 1 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 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 with 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 four of the 12 stocks that qualified the screening:
Stride, a technology-based education company, carries a Zacks Rank #2 and has a VGM Score of B. LRN has a trailing four-quarter earnings surprise of 12.1%, on average. 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 indicates growth of 4.6% and 3.1%, respectively, from the year-ago period. The stock has plummeted 35.9% in the past year.
Brinker International, one of the leading casual dining restaurant companies, carries a Zacks Rank #2 and has a VGM Score of A. The company has a trailing four-quarter earnings surprise of 18.7%, on average.
The Zacks Consensus Estimate for Brinker International’s current financial-year sales and EPS calls for growth of 6.5% and 14.9%, respectively, from the year-ago period. The stock has advanced 8.3% in the past year.
Amazon, a multinational technology and e-commerce company, carries a Zacks Rank #2 and has a VGM Score of B. AMZN has a trailing four-quarter earnings surprise of 22.5%, on average.
The Zacks Consensus Estimate for Amazon’s current financial-year sales and EPS implies growth of 11.9% and 29.7%, respectively, from the year-ago period. The stock has risen 5.8% in the past year.
Cardinal Health, a global healthcare company that distributes pharmaceuticals, manufactures and supplies medical and laboratory products, carries a Zacks Rank #2 and has a VGM Score of A. CAH has a trailing four-quarter earnings surprise of 9.4%, on average.
The Zacks Consensus Estimate for Cardinal Health’s current financial-year sales and EPS indicates growth of 16.2% and 19.7%, respectively, from the year-ago period. The stock has soared 75.3% 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 back test 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.
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 is available at: https://www.zacks.com/performance.