For Immediate Release
Chicago, IL – December 29, 2022 – Stocks in this week’s article are Herc Holdings Inc.
HRI
, ONEOK, Inc.
OKE
, O’Reilly Automotive, Inc.
ORLY
and Fortinet, Inc.
FTNT
.
4 Stocks with Impressive Interest Coverage Ratios to Invest In
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 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.
Herc Holdings Inc.
,
ONEOK, Inc.
,
O’Reilly Automotive, Inc.
and
Fortinet, Inc.
boast an impressive interest coverage ratio.
Here are four of the seven stocks that qualified the screening:
Herc Holdings
, which operates as an equipment rental supplier in the United States and internationally, sports a Zacks Rank #1 and has a VGM Score of B. The expected EPS growth rate for three-five years is 20.6%. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
The Zacks Consensus Estimate for Herc Holdings’ current financial year sales and EPS suggests growth of 31.9% and 51.6%, respectively, from the year-ago period. HRI has declined 19.1% in the past year.
ONEOK
, which is engaged in gathering, processing, storage, and transportation of natural gas in the United States, carries a Zacks Rank #2 and has a VGM Score of B. The expected EPS growth rate for three-five years is 8.5%.
The Zacks Consensus Estimate for ONEOK’s current financial year sales and EPS suggests growth of 39.6% and 14%, respectively, from the year-ago period. ONEOK has a trailing four-quarter earnings surprise of 1.8%, on average. The stock has risen 12.4% in the past year.
O’Reilly Automotive
, which operates as a retailer and supplier of automotive aftermarket parts, tools, supplies, equipment, and accessories, carries a Zacks Rank #2 and has a VGM Score of A. The expected EPS growth rate for three-five years is 13%.
The Zacks Consensus Estimate for O’Reilly Automotive’s current financial year sales and EPS suggests growth of 7% and 5.1%, respectively, from the year-ago period. ORLY has a trailing four-quarter earnings surprise of 7.5%, on average. The stock has risen 19.2% in the past year.
Fortinet
, a global leader in broad, integrated and automated cybersecurity solutions, carries a Zacks Rank #2 and has a VGM Score of B. The expected EPS growth rate for three-five years is 18%.
The Zacks Consensus Estimate for Fortinet’s current financial year sales and EPS suggests growth of 32.5% and 43.8%, respectively, from the year-ago period. FTNT has a trailing four-quarter earnings surprise of 14.6%, on average. The stock has declined 33.8% in the past year.
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For the rest of this Screen of the Week article please visit Zacks.com at:
https://www.zacks.com/stock/news/2033018/4-stocks-with-impressive-interest-coverage-ratio-to-invest-in?art_rec=quote-stock_overview-zacks_news-ID01-txt-2033018
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