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Zacks.com featured highlights include: MDU Resources, Gibraltar Industries, Chemed, Federal Signal and SolarEdge Technologies

Zacks Equity Research

For Immediate Release

Chicago, IL – October 7, 2019 - Stocks in this week’s article are MDU Resources Group MDU, Gibraltar Industries ROCK, Chemed Corp. CHE, Federal Signal Corp. FSS and SolarEdge Technologies SEDG.

Buy These 5 Low Leverage Stocks to Stay Afloat in Crisis

In corporate finance, leverage is the use of exogenous funds by corporations to run their operations smoothly and expand the same. Historically debt financing has been preferred over equity financing.

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, 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 a worst case scenario.

Considering the fact that uncertainty can hit the share market any moment, it is better to take measures beforehand than repent later. This is why investors need to look for stocks that are relatively less leveraged, since a corporation with zero debt hardly exists.

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.

As the third-quarter reporting season is knocking on the door, investors must be eyeing stocks that exhibited solid earnings growth in the prior quarters. But if a stock bears a high debt-to-equity ratio, in times of economic crisis, its so-called booming earnings picture might turn into a nightmare.

Thus, it will be wise for investors to select companies with low leverage.

These are financially more secure and immune to financial bankruptcy.

For the rest of this Screen of the Week article please visit Zacks.com at:https://www.zacks.com/stock/news/549218/buy-these-5-low-leverage-stocks-to-stay-afloat-in-crisis

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MDU Resources Group, Inc. (MDU) : Free Stock Analysis Report
 
Federal Signal Corporation (FSS) : Free Stock Analysis Report
 
Chemed Corporation (CHE) : Free Stock Analysis Report
 
Gibraltar Industries, Inc. (ROCK) : Free Stock Analysis Report
 
SolarEdge Technologies, Inc. (SEDG) : Free Stock Analysis Report
 
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