Zacks.com highlights include: KB Home, Boot Barn Holdings, Crocs and Deckers Outdoor
For immediate release
Chicago, IL – April 6, 2021 – The actions in this week’s article are KB Home KBH, Boot Barn Holdings, Inc. BOOT, Crocs, Inc. CROX and Deckers Outdoor Corporation DECK.
Accumulate those stocks with an incredible interest coverage ratio
A misinformed investor can end up losing money if they bet on a stock solely based on the numbers flashing on a real-time stock screen. Critical analysis of a company’s financial history is essential for making sound investment decisions.
Often times, investors assess a company’s performance by simply looking at its sales and profits, which sometimes don’t reveal the real picture. To be more precise, they do not indicate whether the fundamentals of a company are strong enough to meet its financial obligations. Here the coverage ratio comes into play – the higher the metric, the more efficient the company will be in meeting its financial obligations.
Why an interest coverage ratio?
The interest coverage ratio is used to determine how well a business can pay interest charges on its debt.
Debt, which is crucial in financing the operations of most businesses, has a cost called interest. Interest costs have a direct impact on the profitability of a business. The solvency of the enterprise depends on the efficiency with which it fulfills its interest obligations. Therefore, the interest coverage ratio is one of the important criteria to consider before making an investment decision.
Interest coverage ratio = Earnings before interest and taxes (EBIT) divided by interest expense.
The interest coverage ratio indicates how many times interest could be paid out of profits and assesses the margin of safety a business has to pay interest.
An interest coverage ratio of less than one suggests that the business is unable to meet its interest obligations and may not repay its debt. A business capable of generating profits well in excess of its interest expense can endure financial hardship. It is also worth following the past performance of the company to determine whether the interest coverage ratio has improved or worsened over a given period.
For the rest of this article on the screen of the week, please visit Zacks.com at: https://www.zacks.com/stock/news/1348588/scoop-up-these-4-stocks-with-amazing-interest-coverage-ratio
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