Zacks.com featured highlights include Arcosa, PulteGroup, Livent, Atmos Energy and Teekay Tankers
For Immediate Release
Chicago, IL – August 15, 2023 – Stocks in this week’s article are Arcosa ACA, PulteGroup PHM, Livent LTHM, Atmos Energy ATO and Teekay Tankers TNK.
5 Low-Leverage Stocks to Buy Amid Unstable Market Trends
U.S. stock indices, Nasdaq and S&P 500, slipped on Aug 11, as higher-than-expected U.S. producer prices data pushed Treasury yields higher. Considering the current situation, an investor might not be encouraged to invest in the stock market. However, a prudent investor knows that this is the right time to buy stocks that are safe bets.
In the current scenario, we recommend stocks like Arcosa, PulteGroup, Livent, Atmos Energy and Teekay Tankers, which bear low leverage. These picks can shield investors from incurring losses in times of crisis.
Now, before selecting low-leverage stocks, let's explore what leverage is and how choosing a low-leverage stock helps investors.
In finance, leverage is a term used to denote the practice of borrowing capital by companies to run their operations smoothly and expand the same. Such borrowings are done through debt financing. But there remains an option for equity finance. This is probably due to the cheap and easy availability of debt over equity financing.
However, debt financing has its share of drawbacks. Particularly, it is desirable only as long as it successfully generates a higher rate of return compared to the interest rate. So, to avoid considerable losses in your portfolio, one should always avoid companies that resort to exorbitant debt financing.
The crux of safe investment lies in choosing a company that is not burdened with debt, as a debt-free stock is almost impossible to find.
The equity market can be volatile at times and as an investor, if you don't want to lose big time, we suggest you invest in stocks, which bear low leverage and are hence less risky.
To identify such stocks, 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 lower debt-to-equity ratio reflects improved solvency for a company.
With the second-quarter earnings cycle almost in its last lap, investors must be eyeing stocks that have exhibited solid earnings growth in the recent past. But if a stock bears a high debt-to-equity ratio in times of economic downturn, its so-called booming earnings picture might turn into a nightmare.
Excluding stocks that have a negative or a zero debt-to-equity ratio, here we present our five picks out of the 21 stocks that made it through the screen.
Arcosa: It is a manufacturer of infrastructure-related products and services, which serve construction, energy and transportation markets. On Aug 3, 2023, Arcosa announced its second- quarter 2023 results. Its second-quarter revenues worth $584.8 million went down 3% year over year. The company increased the low end of its 2023 revenue guidance range to $2.25-$2.30 billion.
ACA delivered an earnings surprise of 47.51%, on average, in the trailing four quarters. It holds a Zacks Rank #2 currently. The Zacks Consensus Estimate for 2023 sales implies a 1.2% improvement from the 2022 reported figure.
PulteGroup: It engages in homebuilding and financial services businesses, primarily in the United States. On Jul 27, 2023, the company reported its second-quarter 2023 results. Its net new orders increased 24% from last year, while home sale revenues for the second quarter increased 8% from the prior year to $4.1 billion.
PHM currently sports a Zacks Rank #1. The company delivered an earnings surprise of 19.51% on average in the trailing four quarters. The Zacks Consensus Estimate for 2023 sales suggests a 0.4% improvement year over year.
Livent: It offers lithium chemicals for applications in batteries, agrochemicals, aerospace alloys, greases, pharmaceuticals, polymers, and various industrial applications. On Aug 3, 2023, the company reported its second-quarter 2023 results. Its revenues were $235.8 million, up 8% from the second quarter of 2022, while net income increased 50.3% year over year.
LTHM currently carries a Zacks Rank #2. The company delivered an earnings surprise of 18.96% on average in the trailing four quarters. The Zacks Consensus Estimate for LTHM's 2023 sales indicates a 36.2% improvement from the 2022 reported figure. You can see the complete list of today's Zacks #1 Rank stocks here.
Atmos Energy: It is engaged in the regulated natural gas distribution and storage business. The company serves nearly 3.4 million customers in more than 1,400 communities in eight U.S. states. On Aug 2, 2023, the company reported its third-quarter fiscal 2023 results. Its operating revenues of $662.7 million went down 18.8% year over year.
ATO currently carries a Zacks Rank #2. The company delivered an earnings surprise of 2.40% on average in the trailing four quarters. The Zacks Consensus Estimate for ATO's fiscal 2023 sales suggests an 18.2% improvement from the fiscal 2022 reported figure.
Teekay Tankers: It provides international marine transportation of crude oil and owns a fleet of nine double-hull Aframax-class oil tankers. On Aug 3, 2023, the company reported its second-quarter 2023 results. Its total revenues of $370.6 million were up from $242.4 million at the end of second-quarter 2022.
TNK currently carries a Zacks Rank #2. The company boasts a long-term earnings growth rate of 3%. The Zacks Consensus Estimate for TNK's 2023 sales suggests a 53.3% improvement from 2022 reported figure.
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For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2136138/5-low-leverage-stocks-to-buy-amid-unstable-market-trends
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.
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PulteGroup, Inc. (PHM) : Free Stock Analysis Report
Atmos Energy Corporation (ATO) : Free Stock Analysis Report
Teekay Tankers Ltd. (TNK) : Free Stock Analysis Report
Livent Corporation (LTHM) : Free Stock Analysis Report
Arcosa, Inc. (ACA) : Free Stock Analysis Report
