For Immediate Release
Chicago, IL – July 6, 2020 – Stocks in this week’s article are Teekay Tankers TNK, Tesla Inc. TSLA, NextEra Energy NEE, Nice Ltd NICE and West Pharmaceutical Services WST.
5 Low-Leverage Stocks to Buy Amid Coronavirus-Led Debacle
Leverage, otherwise termed as debt financing, is the use of exogenous funds by corporations to run their operations smoothly and expand the same. Although there is an option for equity financing, historically, debt financing has been preferred over equity because of its easy and cheap availability.
However, one should keep in mind that debt financing remains a feasible option as long as the companies succeed in generating a higher rate of return compared to the interest rate. Exorbitant debt financing might even lead to a corporation’s bankruptcy in the worst-case scenario.
Given the ongoing economic turmoil prevalent across the globe, courtesy of the coronavirus pandemic, investors should know that uncertainty can hit the global equity market anytime and therefore it is better to take measures beforehand than repent later.
Particularly, they should be aware of leverage, or in other words, how much debt a company owns.
This is because the higher the degree of financial leverage, higher is the interest payment for the capital borrowed.
And here comes the importance of leverage ratios, which have been constructed to safeguard investors from becoming victims of debt trap. Debt-to-equity ratio is one such measure, perhaps the most popular one, to evaluate a company’s creditworthiness for potential equity investments.
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 shows improved solvency for a company.
With Q2 earnings in front of us, investors may intend to choose companies that have exhibited solid earnings growth. However, blindly pursuing high earnings yielding stocks, which have a high debt-to-equity ratio, might drain all your money before you know.
For the rest of this Screen of the Week article please visit Zacks.com at:https://www.zacks.com/stock/news/996967/5-low-leverage-stocks-to-buy-amid-coronavirusled-debacle
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NextEra Energy, Inc. (NEE) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
West Pharmaceutical Services, Inc. (WST) : Free Stock Analysis Report
Teekay Tankers Ltd. (TNK) : Free Stock Analysis Report
Nice Ltd. (NICE) : Free Stock Analysis Report
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