For Immediate Release
Chicago, IL – December 30, 2019 - Stocks in this week’s article are Johnson & Johnson JNJ, Gibraltar Industries ROCK, Omnicell OMCL, MDU Resources Group MDU and Career Education Corp. CECO.
Bet on These 5 Low Leverage Stocks to Invest Judiciously
Companies often need exogenous funds to ensure smooth operations and expansion of business. These funds can be arranged through debt and equity. Here comes the concept of leverage, which is basically the usage of debt for such purposes.
In the complex world of investment, understanding the amount of financial leverage a company bears is crucial. This is because the higher the degree of financial leverage, higher is the interest payment for the capital borrowed.
Nevertheless, this should not dissuade companies from adopting debt financing as a strategy because after all debt comes cheaper when compared to equity. Still, debt is something that gives you the chills since it brings with it the burden of repayment with additional interest in the future.
Especially, in times of crisis, no one can be fully sure of how a company will perform the next day and on top of that those bearing large amount of debt are even more prone to bankruptcy. Therefore, the debt level of a company is an important point of consideration while making an investment decision.
Several leverage ratios have emerged as efficient tools to evaluate a company’s credit level to support prudent equity investments. The most popular among them is the debt-to-equity ratio.
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.
Although companies displaying high earnings growth should be ideal investment choices, those among them with high leverage may not generate satisfactory returns. Since a greater cohort of investors is risk-averse by nature, it is reasonable to expect that they will be more attracted to companies with low leverage than high earnings growth.
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MDU Resources Group, Inc. (MDU) : Free Stock Analysis Report
Omnicell, Inc. (OMCL) : Free Stock Analysis Report
Johnson & Johnson (JNJ) : Free Stock Analysis Report
Career Education Corporation (CECO) : Free Stock Analysis Report
Gibraltar Industries, Inc. (ROCK) : Free Stock Analysis Report
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