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Zacks.com featured highlights include: Sprouts Farmers Market, MarineMax, Boise Cascade, D.R. Horton and Cooper Tire & Rubber Co

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Zacks Equity Research
·5 min read
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For Immediate Release

Chicago, IL – December 30, 2020 – Stocks in this week’s article are Sprouts Farmers Market, Inc. SFM, MarineMax, Inc. HZO, Boise Cascade Company BCC, D.R. Horton, Inc. DHI and Cooper Tire & Rubber Company CTB.

Buy These 5 Low-Leverage Stocks to Shield Your Portfolio

Sufficient capital is one of the major requirements for any company to run its operations smoothly. Now, many a-time companies borrow funds to finance this capital either using debt or equity. And here comes the concept of leverage, which refers to the use of borrowed funds by companies in corporate finance.

While there remains an option for equity financing, most companies prefer debt financing. This is because when a company resorts to debt financing, it incurs 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 company’s partial owner but also gets entitled to a direct claim to its future profits.

Another perk of debt financing is that the interest on debt is tax deductible.

Yet, debt financing does possess some drawbacks. In particular, debt financing is not desirable if it fails to generate a higher rate of return compared to the interest rate. So, one should always avoid resorting to exorbitant debt financing, which might even lead to a corporation’s bankruptcy in the worst-case scenario.

Considering the current economic situation worldwide on account of the ongoing pandemic, most investors are skeptical about the stock market’s performance, at least over the near term. So, to avoid huge losses, a prudent investor will choose stocks that bear low leverage since a debt-free corporation is rare to find. Therefore, measuring the leverage level of a particular stock forms an integral part of the safe investment procedure.  

Historically several leverage ratios have been developed to measure the amount of debt a company bears and the debt-to-equity ratio is one of the most common ratios.

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.

With the year 2020 almost at its end, investors might be eyeing stocks that have exhibited solid earnings growth year to date. But if a stock bears a high debt-to-equity ratio, in times of economic downturns, its so-called booming earnings picture might turn into a nightmare.

For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1230344/buy-these-5-low-leverage-stocks-to-shield-your-portfolio

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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Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine.  But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Cooper Tire & Rubber Company (CTB) : Free Stock Analysis Report
 
MarineMax, Inc. (HZO) : Free Stock Analysis Report
 
D.R. Horton, Inc. (DHI) : Free Stock Analysis Report
 
Boise Cascade, L.L.C. (BCC) : Free Stock Analysis Report
 
Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
 
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