Zacks.com featured highlights include Total Energies, Amalgamated Financial, Titan Machinery, Otter Tail and PBF Energy
For Immediate Release
Chicago, IL – October 11, 2022 – Stocks in this week’s article are Total Energies TTE, Amalgamated Financial AMAL, Titan Machinery TITN, Otter Tail OTTR and PBF Energy PBF.
5 Low Leverage Stocks to Buy Amid Rate Hike Anticipation
Wall Street plummeted on Oct 7 as the Federal Reserve remained determined to hike rates, indicating that inflation will persist.
Against this backdrop, it is necessary that investors carefully choose stocks that are sustainable. To this end, we recommend stocks like Total Energies, Amalgamated Financial, Titan Machinery, Otter Tail and PBF Energy, which bear low leverage and therefore can shield investors from incurring losses in times of crisis.
Now, before selecting low-leverage stocks, let’s explore what leverage is and how choosing a low-leverage stock helps investors.
In finance, leverage is a term used to denote the practice of borrowing capital by companies to run their operations smoothly and expand the same. Such borrowings are done through debt financing. But there remains an option for equity finance. This is probably due to the cheap and easy availability of debt over equity financing.
However, debt financing has its share of drawbacks. Particularly, it is desirable only as long as it successfully generates a higher rate of return compared to the interest rate. So, to avoid considerable losses in your portfolio, one should always avoid companies that resort to excessive debt financing.
Therefore, the crux of safe investment lies in choosing a company that is not burdened with debt, as a debt-free stock is almost impossible to find.
Such an event shows how volatile the equity market can be at times and as an investor, if you don’t want to lose big time, we suggest you invest in stocks, which bear low leverage and are hence less risky.
To identify such stocks, historically, several leverage ratios have been developed to measure the amount of debt a company bears. 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 lower debt-to-equity ratio reflects improved solvency for a company.
With the third-quarter earnings cycle coming soon, investors must be eyeing stocks that have exhibited solid earnings growth in the recent past. But if a stock bears a high debt-to-equity ratio in times of economic downturn, its so-called booming earnings picture might turn into a nightmare.
The Winning Strategy
Considering the aforementioned factors, it is prudent to choose stocks with a low debt-to-equity ratio to ensure steady returns.
Yet, an investment strategy based solely on the debt-to-equity ratio might not fetch the desired outcome. To choose stocks that have the potential to give you steady returns, we have expanded our screening criteria to include some other factors.
Excluding stocks that have a negative or a zero debt-to-equity ratio, here we present our five picks out of the 19 stocks that made it through the screen.
Total Energies: It is among the top five publicly traded global integrated oil and gas companies based on production volumes, proved reserves and market capitalization. In October 2022, TotalEnergies and Holcim in Belgium signed a Memorandum of Understanding (MoU) to work together on the full decarbonization of a cement production facility being upgraded by Holcim in Obourg, Belgium.
TTE delivered an earnings surprise of 7.80%, on average, in the trailing four quarters. It carries a Zacks Rank #2 currently. The Zacks Consensus Estimate for 2022 earnings implies a 21.3% improvement from the 2021 reported figure.
Amalgamated Financial: It provides commercial banking and trust services nationally and offers products and services to both commercial and retail customers. In August 2022, the company announced a $15 million loan to Inclusive Prosperity Capital, Inc. (IPC), a clean energy finance 501(c)3 platform, making new capital available to fund climate initiatives benefiting underserved market segments and communities.
AMAL currently has a Zacks Rank #2. The company delivered an earnings surprise of 22.60% in the trailing four quarters, on average. The Zacks Consensus Estimate for 2022 earnings suggests a 25.9% improvement year over year.
Titan Machinery: It represents a diversified mix of agricultural, construction, and consumer products dealerships located in the upper Midwest. In July 2022, Titan Machinery unveiled its all-new, industry-first compact dozer loader. It has the heart of a heavyweight bulldozer and the agility and finesse of a loader. Named Minotaur, after the half-man/half-bull, this is the only compact dozer loader.
TITN sports a Zacks Rank #1 and delivered an earnings surprise of 59.48%, on average, in the trailing four quarters. The Zacks Consensus Estimate for 2022 earnings indicates a 31.3% improvement from the 2021 figure. You can seethe complete list of today’s Zacks #1 Rank stocks here.
Otter Tail: Its primary business is the production, transmission, distribution and sale of electric energy. In August 2022, the company released its second-quarter results. OTTR’s consolidated cash provided by operating activities as of Jun 30, 2022 was $175.6 million compared with $68.6 million as of Jun 30, 2021. The increase in cash provided by operating activities was primarily driven by an $85.5 million increase in net income.
Currently, OTTR has a Zacks Rank of 2. It delivered an earnings surprise of 31.39%, on average, in the trailing four quarters. The Zacks Consensus Estimate for 2022 earnings implies a 30% improvement from the 2021 reported figure.
PBF Energy: Through five oil refineries and associated infrastructure in the United States, the company provides end products that comprise heating oil, transportation fuels, lubricants and many related products. In July 2022, PBF Energy announced its second-quarter results, wherein it revealed that it is going to acquire the remaining public stake in PBF Logistics LP.
PBF currently carries a Zacks Rank #2. It delivered a four-quarter earnings surprise of 77.97%, on average. The Zacks Consensus Estimate for fiscal 2022 earnings suggests a 61.1% improvement from the 2021 reported figure.
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For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1989600/5-low-leverage-stocks-to-buy-amid-fed-rate-hike-anticipation
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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Titan Machinery Inc. (TITN) : Free Stock Analysis Report
Otter Tail Corporation (OTTR) : Free Stock Analysis Report
PBF Energy Inc. (PBF) : Free Stock Analysis Report
Amalgamated Financial Corp. (AMAL) : Free Stock Analysis Report
TotalEnergies SE Sponsored ADR (TTE) : Free Stock Analysis Report
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