Bet on These 5 Low-Leverage Stocks to Avoid Industrial Volatilities

The three major U.S. stock indices tumbled at the bourses on Jan. 14, 2026, led primarily by Nvidia NVDA, whose decline dragged down major technology stocks following the Chinese authorities’ decision to ban the company’s H200 AI chips from entering the country.

Bank stocks also contributed to the U.S. market’s fall yesterday, with major banks like Citigroup and Wells Fargo witnessing a pullback in their share price following their fourth-quarter results, which disappointed investors on some counts. 
At this juncture, investors may want to favor safe-haven assets over high-growth technology stocks to protect their portfolio from high debt-ridden tech giants. So, we recommend companies, such as REV Group REVG, TechnipFMC FTI, Resmed RMD, Zurn Elkay Water Solutions Cor ZWS and SEI Investments SEIC. These stocks carry low leverage and, therefore, may offer a safer option for investors seeking stability during periods of market turmoil.

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 financing 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. As an investor, if you want to avoid significant losses, we suggest focusing on stocks with low leverage, which are generally less risky.

To identify such stocks, several leverage ratios have historically been developed to measure the amount of debt a company carries. The debt-to-equity ratio is among the most widely used financial ratios.

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 fourth-quarter 2025 earnings season entering its first phase, investors should focus on stocks that have demonstrated solid earnings growth in recent periods.

However, if a stock carries a high debt-to-equity ratio during an economic downturn, its seemingly strong earnings could quickly turn into a nightmare.

The Winning Strategy

Considering the aforementioned factors, it would be 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 select stocks with the potential to provide steady returns, we have expanded our screening criteria to include additional factors.

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 expectations.

Zacks Rank #1 or 2: Irrespective of market conditions, stocks with a Zacks Rank #1 or 2 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 11 stocks that made it through the screen.

REV Group: It designs, manufactures and distributes specialty vehicles, and related aftermarket parts and services. On Dec. 10, 2025, the company released its fourth-quarter fiscal 2025 results. Its net sales improved 11.1% year over year to $664.4 million, while its adjusted earnings per share of 83 cents surged 62.7%. 

The Zacks Consensus Estimate for REVG’s fiscal 2026 sales indicates an improvement of 8.1% from the prior-year reported actuals. The Zacks Consensus Estimate for REVG’s fiscal 2026 earnings indicates an improvement of 37.8% from the prior-year reported actuals. It currently sports a Zacks Rank #1.

TechnicFMC: It underwrites specialty insurance and reinsurance risks, principally in Bermuda and internationally. On Jan. 5, 2026, the company announced that it had been awarded a large integrated Engineering, Procurement, Construction, and Installation contract by BP for its greenfield Tiber development in the Gulf of America.

The Zacks Consensus Estimate for FTI’s 2026 revenues suggests an improvement of 6.6% from the year-ago estimated level. The stock boasts a long-term (three-to-five years) earnings growth rate of 18.8%. It currently carries a Zacks Rank #2.

Resmed: It is a well-known designer, manufacturer, and distributor in the worldwide market for generators, masks, and related accessories for the treatment of sleep-disordered breathing (SDB) and other respiratory disorders. 

On Dec. 8, 2025, ResMed announced that it received U.S. Food and Drug Administration (FDA) clearance for Personalized Therapy Comfort Settings (PTCS), which will be marketed as Smart Comfort. Smart Comfort is the first FDA-cleared AI-enabled medical device that recommends personalized comfort settings to help people with obstructive sleep apnea (OSA) initiate and adhere to CPAP therapy.

The Zacks Consensus Estimate for RMD’s fiscal 2026 sales suggests a year-over-year improvement of 8.4%. The stock holds a long-term earnings growth rate of 13.7%. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zurn Elkay Water Solutions: The company is engaged in designing, procuring, manufacturing and marketing products, which provide and improve water. On Dec. 10, 2025, ZWS announced that it has been named by Newsweek and Statista as one of America’s Most Responsible Companies 2026. Of the 600 companies making the list, Zurn Elkay ranked No. 45 overall, No. 6 in the Capital Goods sector and No. 1 among 16 companies based in Wisconsin.

The Zacks Consensus Estimate for ZWS’ 2026 revenues suggests an improvement of 5.3% from the year-ago estimated level. The stock holds a long-term earnings growth rate of 14%. It currently carries a Zacks Rank #2. 

SEI Investments: It is a leading provider of wealth management business solutions in the financial services industry. On Dec. 4, 2025, SEI Investments announced that its global Private Banking business completed 13 client implementation projects and re-contracted 12 clients on the SEI Wealth Platform, during the nine months ended Sept. 30, 2025. Moreover, SEIC signed 21 new professional services engagements and launched 14 projects across 13 unique firms during the same time period.

The Zacks Consensus Estimate for SEIC’s 2026 revenues indicates an improvement of 9.3% from the prior-year estimated figure. The Zacks Consensus Estimate for its 2026 earnings implies an improvement of 12% from the year-ago estimated level. It currently carries a Zacks Rank #2.

You can get the remaining stocks on this list by signing up now for your two-week free trial to the Research Wizard and start using this screen in your trading.

Further, you can create your strategies and backtest them first before taking the investment plunge.
 

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This article originally published on Zacks Investment Research (zacks.com).

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