For Immediate Release
Chicago, IL – November 29, 2017 - Stocks in this week’s article EMCOR Group, Inc. EME, Huntington Ingalls Industries, Inc. HII, Lam Research Corp. LRCX, SK Telecom Co., Ltd. SKM and Landstar System, Inc. LSTR.
Bet on These 5 Low-Leverage Stocks for Assured Returns
A company needs exogenous funds for smooth operations, meeting obligations and expanding business; with capital being one of the basic factors of production. Although there is option for equity financing, a comparative analysis of the cost of capital theory reveals that most companies prefer debt financing over equity. This is because debt is available at a lower cost compared to equity, especially in periods of low interest rates.
Interestingly, the U.S. — the world’s richest economy — is the biggest borrower as well. In fact, according to the FY19 Federal Budget, at the end of FY18, gross U.S. federal government debt is estimated to be $21.09 trillion, more than double the debt load in the last decade.
No one voluntarily wishes to be part of a debt-ridden nation. This is because debt brings with it the burden of interest payments.
Then again, this should not dissuade one from investing in U.S. stocks. After all, in spite of such high debt levels, the United States remains the largest economy in the world in terms of GDP, representing a quarter share of the global economy per the latest World Bank figures.
The problem arises when leverage, referred to as the amount of debt a company bears, becomes exorbitant. In particular, companies with high debt loads are more vulnerable during economic downturns and can even go bankrupt.
Therefore, the need of the hour is to choose stocks prudently, avoiding those with high debt loads. So the crux of safe investment lies in identifying low leverage stocks.
This is where the significance of financial leverage ratio comes into play. This ratio measures the extent of financial leverage a company bears. Several leverage ratios have been developed for this purpose, with debt-to-equity ratio being the most popular
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Landstar System, Inc. (LSTR) : Free Stock Analysis Report
Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report
EMCOR Group, Inc. (EME) : Free Stock Analysis Report
SK Telecom Co., Ltd. (SKM) : Free Stock Analysis Report
Lam Research Corporation (LRCX) : Free Stock Analysis Report
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