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Zacks.com featured highlights include: MDU, Gibraltar, Caseys, FTI and SolarEdge

Zacks Equity Research

For Immediate Release

Chicago, IL – September 4, 2019 - Stocks in this week’s article are MDU Resources Group MDU, Gibraltar Industries ROCK, Caseys General Stores CASY, FTI Consulting FCN and SolarEdge Technologies SEDG.

Buy These 5 Low Leverage Stocks to Keep Losses at Bay

Leverage is an investment strategy adopted by corporations wherein borrowed capital is used to expand operations and amplify possible returns from risk capital. Per the theory of cost of capital, a company’s capital structure reflects a mix of debt and equity that is used to finance capital projects.

Now a comparative analysis of the theory of cost of capital 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. So, debt financing remains the preferred option for corporates.

However, debt financing has its share of drawbacks. The problem arises when leverage, referred to as the amount of debt a company bears, becomes exorbitant. A high degree of financial leverage means high interest payments, which affect a company's bottom line.

Therefore, choosing a less debt-ridden stock should be an appropriate option for a risk-averse investor.  And here comes the importance of leverage ratios, which can measure the exact amount of debt risk a company bears. Debt-to-equity ratio is one such measure, perhaps the most popular one, to evaluate a company’s creditworthiness for potential equity investments.

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 shows improved solvency for a company.

Investors must be looking for stocks exhibiting solid earnings growth in the last couple of quarters. However, blindly investing in stocks displaying solid earnings growth, without considering their debt level, is not a wise move.

For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/499667/buy-these-5-low-leverage-stocks-to-keep-losses-at-bay

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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MDU Resources Group, Inc. (MDU) : Free Stock Analysis Report
 
Caseys General Stores, Inc. (CASY) : Free Stock Analysis Report
 
Gibraltar Industries, Inc. (ROCK) : Free Stock Analysis Report
 
SolarEdge Technologies, Inc. (SEDG) : Free Stock Analysis Report
 
FTI Consulting, Inc. (FCN) : Free Stock Analysis Report
 
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