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Zacks.com featured highlights Vital Farms, PulteGroup, Hamilton Insurance, Greenbrier and Kratos
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For Immediate Release
Chicago, IL – August 23, 2024 – Stocks in this week’s article are Vital Farms (VITL - Free Report) , PulteGroup (PHM - Free Report) , Hamilton Insurance Group (HG - Free Report) , The Greenbrier Companies (GBX - Free Report) and Kratos Defense & Security Solutions (KTOS - Free Report) .
5 Low-Leverage Stocks to Buy on Optimistic Fed Minutes Report
Major U.S. stock indices witnessed an upside on Aug 21, reflecting investors’ optimism about a possible rate cut expected in the next Fed meeting. Notably, the Fed minutes of the July 2024 meeting, published yesterday, indicate that the Federal Reserve has moved closer to a long-awaited interest rate reduction.
This might lure investors into rushing to buy some stocks, with hopes for future growth seeming bright. However, keeping in mind the volatile situation of the world economy lately, it is advisable to choose stocks that come with low leverage, thereby offering less risk during periods of uncertainty. In this regard, we recommend stocks like Vital Farms, PulteGroup, Hamilton Insurance Group, The Greenbrier Companies and Kratos Defense & Security Solutions. These stocks bear low leverage and, thereby, should be a safer option for investors if they don’t want to lose big in times of market turmoil.
Now, before selecting low-leverage stocks, let’s explore what leverage is and how choosing a low-leverage stock helps investors.
What’s the Significance of Low Leverage Stocks?
In finance, leverage is a term used to denote the practice of borrowing capital by companies to run their operations smoothly and expand the same. Such borrowings are done through debt financing. But there remains an option for equity finance. This is probably due to the cheap and easy availability of debt over equity financing.
However, debt financing has its share of drawbacks. Particularly, it is desirable only as long as it successfully generates a higher rate of return compared to the interest rate. So, to avoid considerable losses in your portfolio, one should always avoid companies that resort to excessive debt financing.
The crux of safe investment lies in choosing a company that is not burdened with debt, as a debt-free stock is almost impossible to find.
The equity market can be volatile at times, and, as an investor, if you don’t want to lose big time, we suggest you invest in stocks that bear low leverage and are, hence, less risky.
To identify such stocks, historically, several leverage ratios have been developed to measure the amount of debt a company bears. The debt-to-equity ratio is one of the most common ratios.
Analyzing Debt/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 reflects improved solvency for a company.
With the second-quarter earnings season mostly behind us, investors must be eyeing stocks that have exhibited solid earnings growth in the recent past. But if a stock bears a high debt-to-equity ratio in times of economic downturn, its so-called booming earnings picture might turn into a nightmare.
The Winning Strategy
Considering the factors above, it is prudent to choose stocks with a low debt-to-equity ratio to ensure steady returns.
Yet, 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 to include some other factors.
Excluding stocks that have a negative or a zero debt-to-equity ratio, here we present our five picks out of the 11 stocks that made it through the screen.
Vital Farms: The company offers a range of produced pasture-raised foods, which include shell eggs, butter, hard-boiled eggs, ghee and liquid whole eggs. On Aug 8, 2024, Vital Farms announced its second-quarter 2024 results. Its net revenues improved a solid 38.5% from the prior year quarter’s reported figure, while earnings surged 140%.
VITL delivered an average four-quarter earnings surprise of 82.46%. It currently carries a Zacks Rank #2. The Zacks Consensus Estimate for VITL’s 2024 sales suggests a 26.3% improvement from the 2023 reported figure.
PulteGroup: It engages in homebuilding and financial services businesses, primarily in the United States. On Jul 7, 2024, PulteGroup announced its second-quarter 2024 results. Its net revenues rose 9.8% year over year in the second quarter, while earnings improved a solid 19%.
PHM currently holds a Zacks Rank #2. The company boasts a long-term earnings growth rate of 19%. The Zacks Consensus Estimate for PHM’s 2024 sales suggests an 8.5% improvement from the 2023 reported actuals.
Hamilton Insurance Group: It underwrites specialty insurance and reinsurance risks principally in Bermuda. On Aug 7, 2024, Hamilton Insurance announced its second-quarter 2024 results. Its gross premiums written increased 19.5% year over year in the last reported quarter, while net premiums earned rose 26.3%.
The company boasts a four-quarter average earnings surprise of 53.80%. The Zacks Consensus Estimate for HG’s 2024 sales implies an increase of 48.2% from 2023 sales. HG currently sports a Zacks Rank #1. You can seethe complete list of today’s Zacks #1 Rank stocks here.
The Greenbrier Company: It is a leading supplier of transportation equipment and services to the railroad and related industries. On Jul 8, 2024, the company reported its third-quarter fiscal 2024 results. Its lease fleet increased by 600 units. GBX’s diverse new railcar orders resulted in new railcar backlog of 29,400 units with an estimated value of $3.7 billion.
GBX currently carries a Zacks Rank #2. The stock has an average four-quarter earnings surprise of 15%. It has a long-term earnings growth rate of 18.7%.
Kratos Defense: It offers high-performance, jet-powered, unmanned aerial target drone systems that are designed to replicate state-of-the-art adversarial fighter aircraft, missiles and other threats. The company also specializes in space and satellite communications, cyber security/warfare, microwave electronics, missile defense, hypersonic systems, C5ISR, training and combat systems. On Aug 7, 2024, Kratos Defense announced its second-quarter 2024 results. Its earnings surged 55.6% year over year, while revenues rose 16.8%.
KTOS currently holds a Zacks Rank #2. The company has a four-quarter average earnings surprise of 73.75%. The Zacks Consensus Estimate for KTOS’ 2024 sales suggests a 10.7% improvement from the 2023 reported figure.
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 trading. Further, you can also create your 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.
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/performance for information about the performance numbers displayed in this press release.
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Zacks.com featured highlights Vital Farms, PulteGroup, Hamilton Insurance, Greenbrier and Kratos
For Immediate Release
Chicago, IL – August 23, 2024 – Stocks in this week’s article are Vital Farms (VITL - Free Report) , PulteGroup (PHM - Free Report) , Hamilton Insurance Group (HG - Free Report) , The Greenbrier Companies (GBX - Free Report) and Kratos Defense & Security Solutions (KTOS - Free Report) .
5 Low-Leverage Stocks to Buy on Optimistic Fed Minutes Report
Major U.S. stock indices witnessed an upside on Aug 21, reflecting investors’ optimism about a possible rate cut expected in the next Fed meeting. Notably, the Fed minutes of the July 2024 meeting, published yesterday, indicate that the Federal Reserve has moved closer to a long-awaited interest rate reduction.
This might lure investors into rushing to buy some stocks, with hopes for future growth seeming bright. However, keeping in mind the volatile situation of the world economy lately, it is advisable to choose stocks that come with low leverage, thereby offering less risk during periods of uncertainty. In this regard, we recommend stocks like Vital Farms, PulteGroup, Hamilton Insurance Group, The Greenbrier Companies and Kratos Defense & Security Solutions. These stocks bear low leverage and, thereby, should be a safer option for investors if they don’t want to lose big in times of market turmoil.
Now, before selecting low-leverage stocks, let’s explore what leverage is and how choosing a low-leverage stock helps investors.
What’s the Significance of Low Leverage Stocks?
In finance, leverage is a term used to denote the practice of borrowing capital by companies to run their operations smoothly and expand the same. Such borrowings are done through debt financing. But there remains an option for equity finance. This is probably due to the cheap and easy availability of debt over equity financing.
However, debt financing has its share of drawbacks. Particularly, it is desirable only as long as it successfully generates a higher rate of return compared to the interest rate. So, to avoid considerable losses in your portfolio, one should always avoid companies that resort to excessive debt financing.
The crux of safe investment lies in choosing a company that is not burdened with debt, as a debt-free stock is almost impossible to find.
The equity market can be volatile at times, and, as an investor, if you don’t want to lose big time, we suggest you invest in stocks that bear low leverage and are, hence, less risky.
To identify such stocks, historically, several leverage ratios have been developed to measure the amount of debt a company bears. The debt-to-equity ratio is one of the most common ratios.
Analyzing Debt/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 reflects improved solvency for a company.
With the second-quarter earnings season mostly behind us, investors must be eyeing stocks that have exhibited solid earnings growth in the recent past. But if a stock bears a high debt-to-equity ratio in times of economic downturn, its so-called booming earnings picture might turn into a nightmare.
The Winning Strategy
Considering the factors above, it is prudent to choose stocks with a low debt-to-equity ratio to ensure steady returns.
Yet, 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 to include some other factors.
Excluding stocks that have a negative or a zero debt-to-equity ratio, here we present our five picks out of the 11 stocks that made it through the screen.
Vital Farms: The company offers a range of produced pasture-raised foods, which include shell eggs, butter, hard-boiled eggs, ghee and liquid whole eggs. On Aug 8, 2024, Vital Farms announced its second-quarter 2024 results. Its net revenues improved a solid 38.5% from the prior year quarter’s reported figure, while earnings surged 140%.
VITL delivered an average four-quarter earnings surprise of 82.46%. It currently carries a Zacks Rank #2. The Zacks Consensus Estimate for VITL’s 2024 sales suggests a 26.3% improvement from the 2023 reported figure.
PulteGroup: It engages in homebuilding and financial services businesses, primarily in the United States. On Jul 7, 2024, PulteGroup announced its second-quarter 2024 results. Its net revenues rose 9.8% year over year in the second quarter, while earnings improved a solid 19%.
PHM currently holds a Zacks Rank #2. The company boasts a long-term earnings growth rate of 19%. The Zacks Consensus Estimate for PHM’s 2024 sales suggests an 8.5% improvement from the 2023 reported actuals.
Hamilton Insurance Group: It underwrites specialty insurance and reinsurance risks principally in Bermuda. On Aug 7, 2024, Hamilton Insurance announced its second-quarter 2024 results. Its gross premiums written increased 19.5% year over year in the last reported quarter, while net premiums earned rose 26.3%.
The company boasts a four-quarter average earnings surprise of 53.80%. The Zacks Consensus Estimate for HG’s 2024 sales implies an increase of 48.2% from 2023 sales. HG currently sports a Zacks Rank #1. You can seethe complete list of today’s Zacks #1 Rank stocks here.
The Greenbrier Company: It is a leading supplier of transportation equipment and services to the railroad and related industries. On Jul 8, 2024, the company reported its third-quarter fiscal 2024 results. Its lease fleet increased by 600 units. GBX’s diverse new railcar orders resulted in new railcar backlog of 29,400 units with an estimated value of $3.7 billion.
GBX currently carries a Zacks Rank #2. The stock has an average four-quarter earnings surprise of 15%. It has a long-term earnings growth rate of 18.7%.
Kratos Defense: It offers high-performance, jet-powered, unmanned aerial target drone systems that are designed to replicate state-of-the-art adversarial fighter aircraft, missiles and other threats. The company also specializes in space and satellite communications, cyber security/warfare, microwave electronics, missile defense, hypersonic systems, C5ISR, training and combat systems. On Aug 7, 2024, Kratos Defense announced its second-quarter 2024 results. Its earnings surged 55.6% year over year, while revenues rose 16.8%.
KTOS currently holds a Zacks Rank #2. The company has a four-quarter average earnings surprise of 73.75%. The Zacks Consensus Estimate for KTOS’ 2024 sales suggests a 10.7% improvement from the 2023 reported figure.
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 trading. Further, you can also create your 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/2325545/5-low-leverage-stocks-to-buy-on-an-optimistic-fed-minutes-report
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.
Contact: Jim Giaquinto
Company: Zacks.com
Phone: 312-265-9268
Email: pr@zacks.com
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/performance for information about the performance numbers displayed in this press release.