Zacks.com Featured Highlights: Norbord, Huntington Ingalls, Lam Research, Patrick Industries, SK Telecom And Citizens Financial
Zacks Investment Research | Dec 12, 2017 08:50PM ET
For Immediate Release
Chicago, IL – December 13, 2017 - Stocks in this week’s article Norbord Inc. (NYSE:OSB) , Huntington Ingalls Industries, Inc. (NYSE:HII) , Lam Research Corporation (NASDAQ:LRCX) , Patrick Industries Inc. (NASDAQ:PATK) , SK Telecom Co., Ltd. (NYSE:SKM) and Citizens Financial Group, Inc. (NYSE:CFG) .
5 Low Leverage Stocks to Withstand Interest Rate Hike
Leverage, in particular financial leverage, is the amount of debt that an entity uses to buy more assets. In corporate finance, debt financing is a well-known term, which is used as a tool by companies to ensure smooth business operations. Since companies have limited funds, they need exogenous funding to boost their financial resources from time to time for expansion of operations.
Even with the option for equity financing, companies prefer borrowing funds as these are easily and cheaply available. Moreover, using financial leverage rather than acquiring more equity capital is favored as equity financing reduces the earnings per share of existing shareholders.
Yet the word “debt” is unnerving for many. This is because while debt brings with it the capacity to spend a little bit more, it also carries the burden of repayment with additional interest in the future. In fact, the related amount of interest expense may overwhelm the borrower if it does not earn sufficient returns to offset the interest expense. This is a particular problem when interest rates rise or the returns from assets decline.
Also when the amount of debt a company bears becomes exorbitant, it poses greater risk. In fact, companies with high debt loads are more vulnerable during economic downturns and can even go bankrupt.
Considering this and the fact that analysts are currently estimating a hike in U.S. interest rates at the upcoming Fed meet this month, investors may feel shaky. Nevertheless, this does not indicate that one should totally dissuade from equity investment.
What investors need now is to choose stocks prudently, avoiding those with high debt loads. So the crux of safe investment lies in identifying low leverage stocks.
And here comes the importance of leverage ratios, which have been constructed historically to safeguard investors from becoming victims of debt trap. Debt-to-equity ratio is one such measure, perhaps the most popular one, to evaluate a company’s credit worthiness, for potential equity investments.
For the rest of this Screen of the Week article please visit Zacks.com at: Original post
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.