For Immediate Release
Chicago, IL - June 5, 2018 - Stocks in this week's article include: Shoe Carnival, Inc. SCVL , Arrow Electronics, Inc. ARW , Lithia Motors, Inc. LAD , Grand Canyon Education, Inc. LOPE and Intuit Inc. INTU .
Screen of the Week of Zacks Investment Research:
5 Stocks with Impressive Interest Coverage Ratios
We often judge a company on the basis of its sales and earnings numbers. These, however, may not be enough. Sometimes, a stock gets a boost if these numbers climb year over year or surpass estimates in a particular quarter. This will definitely be a great opportunity for an investor with a shorter horizon to cash in on. But if you seek long-term returns, investments backed only by sales and earnings numbers may not yield the desired results.
A critical analysis of a company's financial background is a prerequisite for an informed investment decision. Here, coverage ratios that determine whether a company is sound enough to meet its financial obligations play a crucial role. The higher the ratio, the better it is. The focus of this article is on "Interest Coverage," which is one such ratio.
Interest Coverage Ratio = Earnings before Interest & Taxes (EBIT) divided by Interest Expense .
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 for most of the companies to finance operations, comes at a cost called interest. Interest expense has a direct bearing on the profitability of a company and its creditworthiness depends on how effectively it meets interest obligations. Therefore, Interest Coverage Ratio is one of the important criteria to factor in before making any investment decision.
Interest Coverage Ratio suggests the number of times the interest could be paid from earnings and gauges the margin of safety a firm carries for paying interest.
An interest coverage ratio lower than 1.0 implies 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. Definitely, 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.
And that's what we're screening for today…
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/306268/5-stocks-with-impressive-interest-coverage-ratio-to-buy-now
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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.
About Screen of the Week
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Strong Stocks that Should Be in the News
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Contact: Jim Giaquinto
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