Buy These 5 Low-Leverage Stocks as Market Touches New Record High

The U.S. stock market rallied yesterday, with all three major indices touching new record highs, reflecting investors’ optimism surrounding the upcoming meeting between Trump and Xi on Thursday, with widespread anticipation of a positive trade truce. The upbeat mood of Wall Street was also on account of the cooler-than-expected inflation data released last week and impressive quarterly results expected from the big tech stocks this week.

With optimism lifting market sentiment, stakeholders might be encouraged to invest more, expecting momentum to build as the U.S.-China meeting draws closer. However, since the share market has lately been on edge, we recommend choosing safe-bet stocks like NatWest Group (NWG), CBOE Global Markets (CBOE), Alcoa Corp. (AA), Safran SA (SAFRY) and Casey's General Stores (CASY) that are less leveraged and thus likely to provide a protective cushion against a sudden economic crisis.

Now, before selecting low-leverage stocks, let’s explore what leverage is and how choosing a low-leverage stock can help investors.

What’s the Significance of Low-Leverage Stocks?

In finance, leverage refers to the practice of borrowing capital to help companies run their operations smoothly and expand their business. 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. To avoid considerable losses in your portfolio, it is advisable to avoid companies that rely excessively on 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 such common ratio.

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 ongoing third-quarter 2025 earnings season, investors should be eyeing stocks that have demonstrated solid earnings growth in recent periods.

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.

Here are the other parameters:

Debt/Equity less than X-Industry Median: Stocks that are less leveraged than their industry peers.

Current Price greater than or equal to 10: The stocks must be trading at a minimum of $10 or above.

Average 20-day Volume greater than or equal to 50000: A substantial trading volume ensures that the stock is easily tradable.

Percentage Change in EPS F(0)/F(-1) greater than X-Industry Median: Earnings growth adds to optimism, leading to a stock’s price appreciation.

VGM Score of A or B: Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best upside potential.

Estimated One-Year EPS Growth F(1)/F(0) greater than 5: This shows earnings growth expectation.

Zacks Rank #1 or 2: Irrespective of market conditions, stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have a proven history of success.

Excluding stocks that have a negative or a zero debt-to-equity ratio, here we present our five picks out of the 17 stocks that made it through the screen.

Natwest Group: It operates as a banking and financial services company. On Oct. 7, 2025, Natwest Group announced its minority investment in JS Group to drive the adoption of its Aspire platform. This investment underscores NatWest’s commitment to supporting innovative solutions that enhance financial accessibility and efficient management for funders through the adoption of technology.

The Zacks Consensus Estimate for NWG’s 2025 earnings has improved 7.5% over the past seven days. The company boasts a long-term (three-to-five years) earnings growth rate of 12.2%. It currently has a Zacks Rank #2.

CBOE Global Markets: It is one of the largest stock exchange operators by volume in the United States and a leading market globally for ETP trading. On Oct. 3, 2025, CBOE reported September trading volume statistics across its global business lines. The statistics reflected that total volume across Cboe's four options exchanges set monthly and quarterly records, with an average daily volume of 20.5 million in September and 18.8 million in the third quarter.

The Zacks Consensus Estimate for CBOE’s 2025 sales suggests an improvement of 10.8% from the year-ago quarter’s level. The company boasts a long-term earnings growth rate of 14.8%. It currently has a Zacks Rank #2.

Alcoa Corp.: It is the world's largest third-party producer of alumina. On Oct. 22, 2025, the company reported its third-quarter 2025 results. Its revenues grew 3.1% year over year. AA’s Alumina production increased 4% sequentially to 2.5 million metric tons.

The Zacks Consensus Estimate for AA’s 2025 sales suggests a year-over-year improvement of 6.3%. The stock boasts a long-term earnings growth rate of 51.9%. It currently carries a Zacks Rank #2.

Safran: It is a high-technology company that produces aircraft, rocket engines, and propulsion systems. On Oct. 24, 2025, the company reported its third-quarter 2025 revenue results. Its third-quarter revenues improved 18.3% year over year, driven by growth witnessed across its business divisions.

The Zacks Consensus Estimate for SAFRY’s 2025 sales suggests a year-over-year improvement of 40.4%. The stock boasts a long-term earnings growth rate of 20.9%. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Casey's General Stores: It operates convenience stores under the Casey's and Casey's General Store names. On Sept. 8, 2025, the company announced financial results for first-quarter fiscal 2026, which ended on July 31, 2025. Its inside same-store sales increased 4.3% year over year, while earnings grew 19.5%.

The Zacks Consensus Estimate for CASY’s fiscal 2026 sales indicates an improvement of 9.6% from the fiscal 2025 reported actuals. The Zacks Consensus Estimate for CASY’s fiscal 2026 earnings indicates an improvement of 9.3% from the fiscal 2025 reported actuals. It currently carries a Zacks Rank #2.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

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