January 22, 2025
Chicago, IL – January 23, 2025 – Stocks in this week’s article are — BioMarin Pharmaceutical Inc. BMRN, Amazon.com, Inc. AMZN, Leidos Holdings, Inc. LDOS and The Ensign Group, Inc. ENSG.
Relying solely on stock price movements without understanding the company’s fundamentals can cause investors to lose money. Investors must carefully review a company's financial health to make informed decisions, especially in today’s unpredictable market.
While sales and earnings are often the go-to metrics, they can sometimes be misleading and may not show whether a company has the financial strength to cover its obligations. This is where the coverage ratio holds the key — a higher ratio signals that a company is more capable of meeting its financial commitments.
BioMarin Pharmaceutical Inc. , Amazon.com, Inc. , Leidos Holdings, Inc. and The Ensign Group, Inc. boast an impressive interest coverage ratio.
The interest coverage ratio is used to determine how effectively a company can pay interest charges on its debt.
Debt, which is crucial to financing operations for the majority of companies, comes at a cost called interest. Interest expense has a direct bearing on the profitability of a company. The company’s creditworthiness depends on how effectively it meets its interest obligations. Therefore, the interest coverage ratio is one of the important criteria to factor in before making any investment decision.
Interest Coverage Ratio = Earnings before Interest & Taxes (EBIT) divided by Interest Expense.
The interest coverage ratio suggests how many times the interest could be paid from earnings and gauges the margin of safety a firm has for paying interest.
An interest coverage ratio lower than 1 suggests that the company is unable to fulfill its interest obligations and could default on repaying debt. A company capable of generating earnings well above its interest expense can withstand financial hardships. One should also track the company’s past performance to determine whether the interest coverage ratio has improved or worsened over 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 15 stocks that qualified the screening:
BioMarin Pharmaceutical , a global biotechnology company, sports a Zacks Rank #1 and a VGM Score of A. BMRN has a trailing four-quarter earnings surprise of 28.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here .
The Zacks Consensus Estimate for BioMarin’s current financial year sales and EPS suggests growth of 16.5% and 58.2%, respectively, from the year-ago period’s levels. The stock has fallen 32.8% in the past year.
Amazon , a multinational technology company focused on e-commerce, cloud computing, online advertising, digital streaming and artificial intelligence, has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for Amazon’s current financial year sales and EPS calls for growth of 10.9% and 82.4%, respectively, from the year-ago period’s levels. AMZN has a trailing four-quarter earnings surprise of 25.9%, on average. The stock has surged 47.8% in the past year.
Leidos Holdings , which provides services and solutions in the defense, intelligence, civil and health markets in the United States and internationally, has a VGM Score of A and carries a Zacks Rank #2.
The Zacks Consensus Estimate for Leidos Holdings’ current financial year sales and EPS suggests growth of 6.4% and 37.4%, respectively, from a year ago. Leidos Holdings has a trailing four-quarter earnings surprise of 29.9%, on average. The stock has risen 45.2% in the past year.
Ensign Group , a healthcare company that provides nursing, assisted living and other rehabilitation services, carries a Zacks Rank #2 and has a VGM Score of B. ENSG has a trailing four-quarter earnings surprise of 1.3%, on average.
The Zacks Consensus Estimate for Ensign Group’s current financial year sales and EPS implies growth of 14% and 15.1%, respectively, from the year-ago period. The stock has rallied 19% 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/2401418/these-4-stocks-boast-impressive-interest-coverage-ratio?art_rec=quote-stock_overview-zacks_news-ID03-txt-2401418
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
BioMarin Pharmaceutical Inc. (BMRN) : Free Stock Analysis Report
Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
The Ensign Group, Inc. (ENSG) : Free Stock Analysis Report
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