Zacks.com Highlights Include: Dillard’s, Target, Herc Holdings and Echo Global Logistics
For immediate release
Chicago, IL – July 9, 2021 – The stocks in this week’s article are Dillard’s, Inc. DDS, Target Corporation TGT, Herc Holdings Inc. HRI, and Echo Global Logistics, Inc. ECHO.
4 stocks that boast impressive interest coverage ratios
We often judge a business on the basis of its sales and profits. These, however, may not be enough. Sometimes a stock gets a boost if those numbers go up year over year or exceed estimates in a particular quarter, providing a great opportunity for an investor with a shorter time horizon to profit. But if you are looking for long-term returns, investments backed only by sales and profit numbers may not deliver the results you want.
A critical analysis of a company’s financial environment is a prerequisite for an informed investment decision. Here, the coverage ratios that determine whether a business is strong enough to meet its financial obligations play a crucial role. The higher the ratio, the better. This article focuses on “interest coverage,” which is one of those ratios.
Interest coverage ratio = Earnings before interest and taxes (EBIT) divided by interest expense.
Why an interest coverage ratio?
The interest coverage rate is used to determine how efficiently a business can pay interest charges on its debt.
Debt, which is crucial for most businesses to finance their operations, has a cost called interest. Interest charges have a direct impact on a company’s profitability and its solvency depends on the efficiency with which it meets its interest obligations. Therefore, the interest coverage rate is one of the important criteria to consider before making any investment decision.
The Interest Coverage Ratio suggests the number of times interest could be paid out of profits and assesses a company’s safety margin for paying interest.
An interest coverage ratio of less than 1.0 implies that the company is unable to meet its interest obligations and could default on its debt repayments. A business capable of generating income well in excess of its interest expense can endure financial hardship. Certainly, one should also follow the past performance of the company to determine if the interest coverage ratio has improved or worsened over a period of time.
For the rest of this article on the screen of the week, please visit Zacks.com at: https://www.zacks.com/stock/news/1759064/4-stocks-that-boast-impressive-interest-coverage-ratio
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Contact: Jim Giaquinto
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