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Zacks.com featured highlights include Heritage-Crystal Clean, Cadence Design Systems, McKesson and Schlumberger
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For Immediate Release
Chicago, IL – October 28, 2022 – Stocks in this week’s article are Heritage-Crystal Clean, Inc. , Cadence Design Systems, Inc. (CDNS - Free Report) , McKesson Corp. (MCK - Free Report) and Schlumberger Ltd. (SLB - Free Report) .
Pick These 4 Stocks with Excellent Interest Coverage Ratios
We often judge a company on the basis of its sales and earnings. 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, thus offering 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. 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?
The 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.
The 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.
Apart from having an Interest Coverage Ratio that is more than the industry average, adding a favorable Zacks Rank and a VGM Score of A or B to your search criteria should lead to better results.
Here are four of the nine stocks that qualified the screening:
Heritage-Crystal Clean, a leading provider of parts cleaning, used oil re-refining, hazardous and non-hazardous waste disposal, emergency and spill response, and industrial and field services, carries a Zacks Rank of #2. It has an expected EPS growth rate of 15% for three-five years. The company has a trailing four-quarter earnings surprise of 37%, on average. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Heritage-Crystal's current financial-year sales and EPS suggests growth of 35% and 26.6%, respectively, from the year-ago period. Heritage-Crystal has a VGM Score of A. The stock has fallen 21.8% in the past year.
Cadence Design Systems, which provides software, hardware, services, and reusable integrated circuit design blocks globally, carries a Zacks Rank #2 and has a VGM Score of B. Its expected EPS growth rate for three-five years is 17.7%.
The Zacks Consensus Estimate for Cadence Design Systems' current financial year sales and EPS suggests growth of 18.4% and 27.4%, respectively, from the year-ago period. Cadence Design Systems has a trailing four-quarter earnings surprise of 10.4%, on average. The stock has declined 11.7% in the past year.
McKesson, which provides healthcare services in the United States and internationally, carries a Zacks Rank #2 and has a VGM Score of B. Its expected EPS growth rate for three-five years is 10.1%.
The Zacks Consensus Estimate for McKesson's current financial year sales and EPS suggests growth of 4.8% and 3%, respectively, from the year-ago period. McKesson has a trailing four-quarter earnings surprise of 13%, on average. The stock has rallied 88% in the past year.
Schlumberger, which provides technology for the energy industry globally, carries a Zacks Rank #2 and has a VGM Score of B. Its expected EPS growth rate for three-five years is 46.1%.
The Zacks Consensus Estimate for Schlumberger's current financial year sales and EPS suggests growth of 21.1% and 65.6%, respectively, from the year-ago period. Schlumberger has a trailing four-quarter earnings surprise of 12.7%, on average. The stock has risen 56.7% in the past year.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and backtest them first before taking the investment plunge.
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.
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
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks.com featured highlights include Heritage-Crystal Clean, Cadence Design Systems, McKesson and Schlumberger
For Immediate Release
Chicago, IL – October 28, 2022 – Stocks in this week’s article are Heritage-Crystal Clean, Inc. , Cadence Design Systems, Inc. (CDNS - Free Report) , McKesson Corp. (MCK - Free Report) and Schlumberger Ltd. (SLB - Free Report) .
Pick These 4 Stocks with Excellent Interest Coverage Ratios
We often judge a company on the basis of its sales and earnings. 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, thus offering 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. 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?
The 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.
The 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.
Heritage-Crystal Clean, Inc., Cadence Design Systems, Inc., McKesson Corp. and Schlumberger Ltd. boast impressive interest coverage ratios.
Apart from having an Interest Coverage Ratio that is more than the industry average, adding a favorable Zacks Rank and a VGM Score of A or B to your search criteria should lead to better results.
Here are four of the nine stocks that qualified the screening:
Heritage-Crystal Clean, a leading provider of parts cleaning, used oil re-refining, hazardous and non-hazardous waste disposal, emergency and spill response, and industrial and field services, carries a Zacks Rank of #2. It has an expected EPS growth rate of 15% for three-five years. The company has a trailing four-quarter earnings surprise of 37%, on average. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Heritage-Crystal's current financial-year sales and EPS suggests growth of 35% and 26.6%, respectively, from the year-ago period. Heritage-Crystal has a VGM Score of A. The stock has fallen 21.8% in the past year.
Cadence Design Systems, which provides software, hardware, services, and reusable integrated circuit design blocks globally, carries a Zacks Rank #2 and has a VGM Score of B. Its expected EPS growth rate for three-five years is 17.7%.
The Zacks Consensus Estimate for Cadence Design Systems' current financial year sales and EPS suggests growth of 18.4% and 27.4%, respectively, from the year-ago period. Cadence Design Systems has a trailing four-quarter earnings surprise of 10.4%, on average. The stock has declined 11.7% in the past year.
McKesson, which provides healthcare services in the United States and internationally, carries a Zacks Rank #2 and has a VGM Score of B. Its expected EPS growth rate for three-five years is 10.1%.
The Zacks Consensus Estimate for McKesson's current financial year sales and EPS suggests growth of 4.8% and 3%, respectively, from the year-ago period. McKesson has a trailing four-quarter earnings surprise of 13%, on average. The stock has rallied 88% in the past year.
Schlumberger, which provides technology for the energy industry globally, carries a Zacks Rank #2 and has a VGM Score of B. Its expected EPS growth rate for three-five years is 46.1%.
The Zacks Consensus Estimate for Schlumberger's current financial year sales and EPS suggests growth of 21.1% and 65.6%, respectively, from the year-ago period. Schlumberger has a trailing four-quarter earnings surprise of 12.7%, on average. The stock has risen 56.7% in the past year.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and backtest them first before taking the investment plunge.
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.
Click here to sign up for a free trial to the Research Wizard today.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1998395/pick-these-4-stocks-with-excellent-interest-coverage-ratio
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
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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Visit: https://www.zacks.com/
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.