For Immediate Release
Chicago, IL – August 5, 2020 – Stocks in this week’s article are Sprouts Farmers Market, Inc. SFM, O'Reilly Automotive, Inc. ORLY, Dollar General Corporation DG, Canadian Solar Inc. CSIQ and America's Car-Mart, Inc. CRMT.
Bet on These 5 Stocks with Exciting Interest Coverage Ratios
An ill-informed investor can end up losing cash if he wagers on a stock only on the basis of the numbers flashing on a real-time stock screen. A critical analysis of a company’s financial background is essential for wise investment decisions.
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 coverage ratio comes into play — the higher the metric, 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 interest charges on its debt.
Debt, which is crucial to financing operations for majority of companies, comes at a cost called interest. Interest expense has a direct bearing on the profitability of a company. 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: https://www.zacks.com/stock/news/1035061/bet-on-these-5-stocks-with-exciting-interest-coverage-ratio
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Canadian Solar Inc. (CSIQ): Free Stock Analysis Report
OReilly Automotive, Inc. (ORLY): Free Stock Analysis Report
Dollar General Corporation (DG): Free Stock Analysis Report
Americas CarMart, Inc. (CRMT): Free Stock Analysis Report
Sprouts Farmers Market, Inc. (SFM): Free Stock Analysis Report
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