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Zacks.com featured highlights include: Louisiana-Pacific, Amedisys, MGM, Oshkosh and Federated National
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For Immediate Release
Chicago, IL – May 21, 2018 - Stocks in this week’s article Louisiana-Pacific Corp. (LPX - Free Report) , Amedisys Inc. (AMED - Free Report) , MGM Growth Properties LLC , Oshkosh Corporation (OSK - Free Report) and Federated National Holding Company .
Buy These 5 Low-Leverage Stocks to Strengthen Your Portfolio
In the world of business finance, leverage refers to an investment strategy that involves borrowing of funds to finance the expansion of the business, purchase of inventory and other assets as well as supporting other aspects of business operations. Financial leverage is the amount of debt that exists in the capital structure of a company.
Per the theory of cost of capital, a company’s capital structure reflects a mix of debt and equity used to finance its capital projects. A comparative analysis of the same theory reveals that most companies prefer debt financing over equity since debt is cheaper, especially in periods of low interest rates.
This is because when a company resorts to debt financing, it takes on fixed expenses in the form of interest payments for a specific time period. However, in case of equity financing, a shareholder not only becomes a partial owner of the company but develops a direct claim on the company’s future profits as well. Consequently, debt financing has emerged as a more popular financing option among the majority of corporations.
But debt financing has its share of drawbacks. The problem arises when leverage becomes exorbitant. A high degree of financial leverage means high interest payments, which tend to affect the company's bottom line.
Of course, this does not mean that debt financing should be a taboo in corporate financing. Nevertheless, given the current macroeconomic scenario in the United States, in favor of interest rate hikes, the market seems to be not so suitable for borrowers
Therefore, to safeguard their portfolio from losses, the real challenge for an investor is to determine whether the organization’s debt level is sustainable. This is because a debt-free corporation is rare to find. 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 company with a lower debt-to-equity ratio indicates improved solvency for a company.
With the first-quarter reporting in its last lap, investors must be targeting stocks that are exhibiting solid earnings growth. But if the stocks bear a high debt-to-equity ratio, in times of economic downturns, their so-called booming earnings picture might turn into a nightmare.
Considering this, it will be wise for investors to select companies with low leverage. These are financially more secure and immune to financial bankruptcy.
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 http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks.com featured highlights include: Louisiana-Pacific, Amedisys, MGM, Oshkosh and Federated National
For Immediate Release
Chicago, IL – May 21, 2018 - Stocks in this week’s article Louisiana-Pacific Corp. (LPX - Free Report) , Amedisys Inc. (AMED - Free Report) , MGM Growth Properties LLC , Oshkosh Corporation (OSK - Free Report) and Federated National Holding Company .
Buy These 5 Low-Leverage Stocks to Strengthen Your Portfolio
In the world of business finance, leverage refers to an investment strategy that involves borrowing of funds to finance the expansion of the business, purchase of inventory and other assets as well as supporting other aspects of business operations. Financial leverage is the amount of debt that exists in the capital structure of a company.
Per the theory of cost of capital, a company’s capital structure reflects a mix of debt and equity used to finance its capital projects. A comparative analysis of the same theory reveals that most companies prefer debt financing over equity since debt is cheaper, especially in periods of low interest rates.
This is because when a company resorts to debt financing, it takes on fixed expenses in the form of interest payments for a specific time period. However, in case of equity financing, a shareholder not only becomes a partial owner of the company but develops a direct claim on the company’s future profits as well. Consequently, debt financing has emerged as a more popular financing option among the majority of corporations.
But debt financing has its share of drawbacks. The problem arises when leverage becomes exorbitant. A high degree of financial leverage means high interest payments, which tend to affect the company's bottom line.
Of course, this does not mean that debt financing should be a taboo in corporate financing. Nevertheless, given the current macroeconomic scenario in the United States, in favor of interest rate hikes, the market seems to be not so suitable for borrowers
Therefore, to safeguard their portfolio from losses, the real challenge for an investor is to determine whether the organization’s debt level is sustainable. This is because a debt-free corporation is rare to find. 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 company with a lower debt-to-equity ratio indicates improved solvency for a company.
With the first-quarter reporting in its last lap, investors must be targeting stocks that are exhibiting solid earnings growth. But if the stocks bear a high debt-to-equity ratio, in times of economic downturns, their so-called booming earnings picture might turn into a nightmare.
Considering this, it will be wise for investors to select companies with low leverage. These are financially more secure and immune to financial bankruptcy.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/304101/buy-these-5-low-leverage-stocks-to-strengthen-your-portfolio
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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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.
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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 http://www.zacks.com/performance for information about the performance numbers displayed in this press release.