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Zacks.com featured highlights: Darden Restaurants, Louisiana-Pacific, Anthem, Huntington Ingalls Industries and Arrow Electronics

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For Immediate Release

Chicago, IL - April 28, 2017 - Stocks in this week's article include Darden Restaurants, Inc. (NYSE: DRI - Free Report ), Louisiana-Pacific Corporation (NYSE: LPX - Free Report ), Anthem, Inc . (NYSE: ANTM - Free Report ), Huntington Ingalls Industries, Inc. (NYSE: HII - Free Report ) and Arrow Electronics, Inc. (NYSE: ARW - Free Report ).

Screen of the Week of Zacks Investment Research:

Buy These 5 Low-Leverage Stocks to Secure Your Portfolio

The U.S. stock market seems to be on a high right now on account of the dynamic market conditions that have been prevailing across the globe for the past few days. Two factors - reduced risk of euro dissolution in the wake of market-preferred French election results and hopes for a corporate tax cut by Trump - are driving the equity market rally.

The global equity markets picked up pace at the beginning of the week as the first round of the French presidential election went in favor of Emmanuel Macron. On the other hand, U.S. President Trump's promise to cut corporate tax by 20% and to impose a 10% tax on foreign earnings in repatriation, boosted market sentiments.

On top of that, Federal Reserve chairperson, Janet Yellen's consistent claim that the U.S. economy is growing "pretty healthy", leads to more optimism. All these factors set the stage for investment in U.S. stocks.

However, analysts remain concerned about low productivity growth and sluggish consumer spending. Besides, following Trump's failure to repeal Obamacare, a few are skeptical about the implementation of the corporate tax cut.

Therefore, it is better to be safe than sorry and invest in less risky stocks. Considering the fact that uncertainty can hit equity market any time, it is better to avoid highly leveraged stocks as they are the most vulnerable ones at times of volatility.

So investors must look for stocks that are less leveraged, as only a few fortunate ones can totally escape from debt financing. Herein comes the use of financial leverage ratio, which helps one to identify highly leveraged stocks. One of the most popular leverage ratios is the debt-to-equity ratio.

Analyzing Debt-to-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 implies a more financially stable business, thereby making it a more worthy investment opportunity.

With the first-quarter reporting cycle in full swing, the earnings growth picture seems to be improving from the preceding quarter. In fact, growth this reporting season is expected to hit the highest level in the last three years. However, to be on the safer side, we urge investors to go for low leverage stocks instead of targeting growth stocks. After all, low leverage stocks are financially more secure and immune to market upheavals.

The Winning Strategy

Considering the aforementioned discussion, it is imperative for a sensible investor to choose stocks that have a low debt-to-equity ratio.

However, 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.

Here are the other parameters:

Debt/Equity less than X-Industry Median: Stocks that are less leveraged than their industry peers.

Current Price greater than or equal to 10: The stocks must be trading at a minimum of $10 or above.

Average 20-day Volume greater than or equal to 50000: A substantial trading volume ensures that the stock is easily tradable.

Percentage Change in EPS F(0)/F(-1) greater than X-Industry Median: Earnings growth adds to optimism, leading to a stock's price appreciation.

Estimated One-Year EPS Growth F(1)/F(0) greater than 5: This shows earnings growth expectation.

Zacks Rank #1 (Strong Buy) or #2 (Buy): No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 or 2 have a proven history of success.

VGMScore of A or B: Our research shows that stocks with a VGM Score of 'A' or 'B' when combined with a Zacks Rank #1 or 2 offer the best upside potential.

Excluding stocks that have a negative or a zero debt-to-equity ratio, here are five of the 16 stocks that made it through the screen.

Darden Restaurants, Inc. (NYSE: DRI - Free Report ) : This company is the world's largest casual dining restaurant and engages in the ownership and operation of casual dining restaurants in the U.S. and Canada. It carries a Zacks Rank #2 and witnessed an average positive earnings surprise of 3.35% in the trailing four quarters.

Louisiana-Pacific Corporation (NYSE: LPX - Free Report ) : It manufactures and sells building products primarily for use in new home construction, repair and remodeling, and outdoor structures, as well as light industrial and commercial construction. The company carries a Zacks Rank #1 and witnessed an average positive earnings surprise of 66.28% in the trailing four quarters.

Anthem, Inc . (NYSE: ANTM - Free Report ): This corporation operates as a health benefits company in the U.S. It witnessed an average positive earnings surprise of 3.86% in the trailing four quarters and carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Huntington Ingalls Industries, Inc. (NYSE: HII - Free Report ) : This largest ship builder in the U.S. engages in designing, building, overhauling, and repairing of ships. It carries a Zacks Rank #2 and witnessed an average positive earnings surprise of 19.85% in the trailing four quarters.

Arrow Electronics, Inc. (NYSE: ARW - Free Report ) : The company provides products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions worldwide. It carries a Zacks Rank #2 and reported a positive earnings surprise of 1.09% last quarter.

Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

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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.

Disclosure: Performance information for Zacks' portfolios and strategies are available at:https://www.zacks.com/performance.

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Sign up now for your free trial today and start picking better stocks immediately. And with the backtesting feature, you can test your ideas to see how you can improve your trading in both up markets and down markets. Don't wait for the market to get better before you decide to do better. Start learning how to be a better trader today: https://at.zacks.com/?id=111

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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Darden Restaurants, Inc. (DRI): Free Stock Analysis Report

Louisiana-Pacific Corporation (LPX): Free Stock Analysis Report

Anthem, Inc. (ANTM): Free Stock Analysis Report

Huntington Ingalls Industries, Inc. (HII): Free Stock Analysis Report

Arrow Electronics, Inc. (ARW): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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