Major U.S. stock indices ended lower on Aug. 12, 2026, as investor sentiment was weighed down by escalating U.S.-Iran tensions and dimming prospects for the reopening of the Strait of Hormuz. A surge in crude oil prices, combined with underperformance across key technology stocks, further pressured the broader market. 

In an environment marked by heightened geopolitical volatility and macro uncertainty, pivoting to financially resilient companies — specifically low-leverage stocks backed by strong balance sheets — offers a prudent defensive strategy for equity investors. 

These fiscally conservative companies are better positioned to navigate interest rate fluctuations and geopolitical uncertainty. By providing a stable foundation in a shifting market, they can serve as a strategic hedge against a potential energy-driven economic slowdown.

We recommend low-leverage stocks, such as LifeStance Health Group (LFST Quick QuoteLFST - Free Report) , Tutor Perini (TPC Quick QuoteTPC - Free Report) , Valero Energy (VLO Quick QuoteVLO - Free Report) , SharkNinja, Inc. (SN Quick QuoteSN - Free Report) and Lumentum (LITE Quick QuoteLITE - Free Report) . Before selecting low-leverage stocks, it is important to understand what leverage is and how investing in low-leverage companies can benefit investors.

What’s the Significance of Low-Leverage Stocks?

In finance, leverage refers to the use of borrowed capital to support business operations and drive expansion. Companies typically raise such funds through debt financing, although equity financing remains an alternative. However, firms often prefer debt due to its relatively lower cost and easier availability compared to issuing equity.

Debt financing comes with inherent risks and is beneficial only when it generates returns that exceed the cost of borrowing. To limit downside risk, investors should be cautious of companies that rely excessively on debt. Prudent investing involves selecting businesses with manageable leverage, as completely debt-free companies are rare.

The equity market can be volatile at times. As an investor, if you want to avoid significant losses, we suggest focusing on stocks with low leverage, which are generally deemed less risky.

To identify such stocks, several leverage ratios have historically been developed to measure the amount of debt a company carries. The debt-to-equity ratio is among the most widely used financial 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 suggests improved solvency for a company.

With the second-quarter 2026 earnings season almost in its last lap, investors should focus on stocks that have demonstrated solid earnings growth in recent periods.

If a stock carries a high debt-to-equity ratio during an economic downturn, its seemingly strong earnings could quickly turn into a nightmare.

The Winning Strategy

Considering the aforementioned factors, it would be prudent to choose stocks with a low debt-to-equity ratio to ensure steady returns.

Yet, an investment strategy based solely on the debt-to-equity ratio might not fetch the desired outcome. To select stocks with the potential to provide steady returns, we have expanded our screening criteria to include additional factors.

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 $10 or higher.

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.

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 (Strong Buy) or 2 (Buy), offer the best upside potential.

Estimated One-Year EPS Growth F (1)/F(0) Greater Than 5: This shows earnings growth expectations.

Zacks Rank #1 or 2: Irrespective of market conditions, stocks with a Zacks Rank #1 or 2 have a proven history of success.

Excluding stocks with a negative or zero debt-to-equity ratio, we present our five picks out of the 20 that made it through the screen.

LifeStance Health: It is a provider of virtual and in-person outpatient mental health care for children, adolescents and adults of mental health conditions. On Aug. 6, 2026, the company announced its second-quarter 2026 results. Its revenues increased 26% year over year, while its visit volumes improved 19% to 2.6 million. 

The Zacks Consensus Estimate for LFST’s 2026 revenues indicates an improvement of 16.6% from the prior-year reported level. The Zacks Consensus Estimate for LFST’s 2026 earnings indicates a massive surge of 600% from the prior-year reported level. It currently carries a Zacks Rank #2.

Tutor Perini: It provides diversified general contracting, construction management and design-build services to private clients and public agencies worldwide. On Aug. 5, 2026, the company released its second-quarter 2026 results. TPC’s revenues improved 19% year over year, while its adjusted earnings per share soared 23%.  

The Zacks Consensus Estimate for TPC’s 2026 revenues indicates an improvement of 14% from the prior-year reported numbers. The Zacks Consensus Estimate for TPC’s 2026 earnings indicates an improvement of 27.7% from the prior-year reported numbers. TPC currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Valero Energy: It is a multinational manufacturer and marketer of petroleum-based and low-carbon liquid transportation fuels and petrochemical products. On July 30, 2026, the company announced its second-quarter 2026 results. 

VLO’s second-quarter adjusted earnings per share were $12.54, which marked a massive improvement from the year-ago quarter’s reported level of $2.28. Its revenues soared 49% year over year to $44.5 billion.

The Zacks Consensus Estimate for VLO’s 2026 revenues indicates an improvement of 14.4% from the prior-year reported number. The stock boasts a long-term (three-to-five years) earnings growth rate of 37.30%. It currently holds a Zacks Rank #2.

SharkNinja: It offers a different approach to home insurance, built from the ground up to deliver a new standard of care and protection for homeowners. On July 16, 2026, the company launched the Ninja Crispi Microwave, the brand’s first-ever countertop microwave, which delivers traditional settings plus crispy, oven-quality results in non-toxic glass, with full meals ready up to 60% faster than a conventional oven.

The Zacks Consensus Estimate for SN’s 2026 revenues suggests an improvement of 16.8% from the year-ago reported level. The stock boasts a long-term earnings growth rate of 14.40%. It currently holds a Zacks Rank #2.   

Lumentum: It is a provider of optical and photonic products serving cloud, Artificial Intelligence/Machine Learning (AI/ML), telecommunications, consumer and industrial end markets. On Aug. 11, 2026, the company announced its fourth-quarter fiscal 2026 results. Its quarterly revenues improved 109.3% year over year, while its adjusted operating margin expanded 2,160 basis points (bps) to 36.6%. 

The Zacks Consensus Estimate for LITE’s fiscal 2027 revenues indicates an improvement of 88.4% from the prior-year reported actuals. The Zacks Consensus Estimate for LITE’s fiscal 2027 earnings indicates an improvement of 121.8% from the prior-year reported actuals. It currently holds a Zacks Rank #2.