Zacks.com Featured Highlights Include: BJ's, CBRE, Dave & Buster's, Lithia And Boeing
Zacks Investment Research | Dec 03, 2018 09:48PM ET
For Immediate Release
Chicago, IL – December 4, 2018 - Stocks in this week’s article are BJ's Restaurants, Inc. (NASDAQ:BJRI) , CBRE Group, Inc. (NYSE:CBRE) , Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) , Lithia Motors, Inc. (NYSE:LAD) and The Boeing Company (NYSE:BA) .
Scoop Up These 5 Stocks with Amazing Interest Coverage Ratios
A layman can end up losing bucks if he decides to pick a stock only on the basis of numbers flashing on a real-time stock screen. A critical analysis of a company’s financial background is essential for a better investment decision.
Often investors evaluate a company’s performance by simply looking at its sales and earnings, which sometimes do not reveal the real picture. To be more precise, they do not tell whether a company’s fundamentals are sound enough to meet its financial obligations. Here, the role of coverage ratios comes into play — the higher these are the more efficient an enterprise will be in meeting its financial obligations.
Why Interest Coverage Ratio?
Interest Coverage Ratio is used to determine how effectively a company can pay the interest charges on its debt.
Debt, which is crucial to financing operations for the majority of companies, comes at a cost called interest. Interest expense has a direct bearing on the profitability of a company. And the company’s creditworthiness depends on how effectively it meets its interest obligations. Therefore, Interest Coverage Ratio is one of the important criteria to factor in before making any investment decision.
Interest Coverage Ratio = Earnings before Interest & Taxes (EBIT) divided by Interest Expense.
Interest Coverage Ratio suggests how many times the interest could be paid from earnings and gauges the margin of safety a firm has for paying interest.
An interest coverage ratio lower than one suggests that the company is unable to fulfill its interest obligations and could default on repaying debt. A company that is capable of generating earnings well above its interest expense can withstand financial hardships. One should also track the company’s past performance to determine whether the interest coverage ratio has improved or worsened over a period of time.
For the rest of this Screen of the Week article please visit Zacks.com at: Zacks Investment Research
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