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Chicago, IL – May 15, 2025 – The stocks in this week’s article are Sterling Infrastructure, Inc. STRL, AXIS Capital Holdings Ltd. AXS, Molina Healthcare, Inc. MOH and Halozyme Therapeutics, Inc. HALO.
We often judge a company based on its sales and earnings. However, these metrics may not be sufficient on their own. A stock might get a boost if these figures rise year over year or surpass estimates in a particular quarter, offering a lucrative opportunity for short-term investors to cash in. Relying solely on sales and earnings numbers may not yield the desired long-term returns. For those seeking sustainable investment growth, a deeper dive into the company’s financial health and stability is essential.
A critical analysis of a company’s financial background is a prerequisite for an informed investment decision. Coverage ratios, which assess whether a company is robust enough to meet its financial obligations, play a crucial role in this analysis. A higher ratio generally indicates a stronger financial position. This article focuses on the Interest Coverage Ratio, a key indicator used to evaluate a company's ability to pay interest on its debt, ensuring that the company is not over-leveraged and can comfortably meet its interest obligations from its operating earnings.
Interest Coverage Ratio = Earnings before Interest & Taxes (EBIT) divided by Interest Expense.
Sterling Infrastructure, Inc., AXIS Capital Holdings Ltd., Molina Healthcare, Inc. and Halozyme Therapeutics, Inc. boast an impressive interest coverage ratio.
The interest coverage ratio is used to determine how effectively a company can pay the interest charges on its debt.
Debt, which is crucial for most companies to finance operations, comes at a cost called interest. Interest expense has a direct bearing on a company's profitability, and its creditworthiness depends on how effectively it meets interest obligations. Therefore, the interest coverage ratio is one of the important criteria to factor in before making any investment decision.
The interest coverage ratio suggests the number of times the interest could be paid from earnings and gauges the margin of safety a firm carries for paying interest.
An interest coverage ratio lower than 1.0 implies that the company is unable to fulfill its interest obligations and could default on repaying debt. A company that is 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.
Here are four of the 14 stocks that qualified the screening.
Sterling Infrastructure, which is engaged in e-infrastructure, transportation and building solutions, carries a Zacks Rank #2 and has a VGM Score of A. Sterling Infrastructure delivered a trailing four-quarter earnings surprise of 11.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Sterling Infrastructure’s current financial year earnings per share (EPS) suggests growth of 38.5% from the year-ago period. STRL has risen 38.3% in the past year.
AXIS Capital Holdings, a global specialty underwriter and provider of insurance and reinsurance solutions, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 13.9%, on average. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
The Zacks Consensus Estimate for AXIS Capital’s current financial year sales and EPS implies growth of 9.2% and 3.4%, respectively, from the year-ago period. AXIS Capital has a VGM Score of B. Shares of AXS have rallied 43.1% in the past year.
Molina Healthcare, which provides managed healthcare services under Medicaid and Medicare programs and through state insurance marketplaces, carries a Zacks Rank #2 and has a VGM Score of A.
The Zacks Consensus Estimate for Molina Healthcare’s current financial year sales and EPS calls for growth of 8.4% and 7.8%, respectively, from the year-ago period. The stock has declined 10.3% in the past year.
Halozyme Therapeutics, a biopharmaceutical company, carries a Zacks Rank #2 and has a VGM Score of A. HALO has a trailing four-quarter earnings surprise of 17.6%, on average.
The Zacks Consensus Estimate for Halozyme Therapeutics’ current financial year sales and EPS suggests growth of 21% and 23.6%, respectively, from the year-ago period. The stock has risen 9.6% in the past year.
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Disclosure: Officers, directors and 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 mentioned in this material.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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This article originally published on Zacks Investment Research (zacks.com).
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