For Immediate Release
Chicago, IL – February 22, 2019 - Stocks in this week’s article are Merit Medical Systems Inc. MMSI, Pinnacle West Capital Corp. PNW, Amedysis, Inc. AMED, Southwest Airlines Co. LUV and Royal Caribbean Cruises Ltd. RCL.
Worried About Rate Hikes? Buy These 5 Low-Leverage Stocks
In the complex world of investment, debt financing is a well-known strategy adopted by the majority of corporations for expanding their business operations from time to time. Dearth of ample funds is the primary driving force behind this strategy. However, resorting to debt is still considered a taboo as it carries the burden of interest payments.
This is because companies with large debt loads are more vulnerable during economic downturns and can even go bankrupt in the worst-case scenario. Of course, companies may resort to equity financing as an alternative option to boost their financial resources. 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 favored option for corporates in times of funding their operations. In particular, it is the easy and cheap availability of debt that makes it more popular among corporations.
However, too much debt is detrimental for a company’s health. If a company is highly leveraged, in other words carries exorbitant amount of debt, investors will not add it to their portfolios willingly. Afterall, a high degree of financial leverage means high interest payments, which may affect the company's bottom line.
With the current U.S. administration being in favor of a steady interest rate hike over the near term, investors might be reluctant to pick any U.S. stock for the time being. However, a mere rate hike should not discourage investors since the U.S. economy has been debt dependent since its foundation and is still the largest in the world. What they need to do is pick companies that have a lower debt burden.
This is where the significance of financial leverage ratio comes into play as it measures the extent of financial leverage a company bears. To choose a corporation that is not so highly indebted, several leverage ratios have been developed over the years, with debt-to-equity ratio being the most popular.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/355968/worried-about-rate-hikes-buy-these-5-low-leverage-stocks
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Southwest Airlines Co. (LUV) : Free Stock Analysis Report
Pinnacle West Capital Corporation (PNW) : Free Stock Analysis Report
Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
Amedisys, Inc. (AMED) : Free Stock Analysis Report
Merit Medical Systems, Inc. (MMSI) : Free Stock Analysis Report
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