Alcoa(AA) ZACKS·2025-02-19 15:40Market Overview - The majority of U.S. equities indices finished slightly positive on February 18, reflecting investor skepticism regarding Trump's tariff policy and the likelihood of a Federal Reserve rate cut [1] - President Trump proposed a 25% tariff on automobile, semiconductor, and pharmaceutical imports, contributing to market uncertainty [1] Investment Strategy - In the current market environment, prudent investors are encouraged to consider low-leverage stocks as safer investment options [2] - Recommended stocks include Alcoa Corp (AA), Noble Corporation Plc (NE), Nextracker (NXT), The Greenbrier Companies (GBX), and EZCORP (EZPW), all of which exhibit low leverage [2] Understanding Leverage - Leverage refers to the practice of borrowing capital for operations and expansion, typically through debt financing [4] - Excessive debt financing can lead to significant losses, making low-leverage stocks more desirable for risk-averse investors [5] Debt-to-Equity Ratio - The debt-to-equity ratio is a key metric for assessing a company's financial risk, with a lower ratio indicating better solvency [7] - High debt-to-equity ratios can turn positive earnings reports into negative outcomes during economic downturns [8] Stock Selection Criteria - Stocks should have a debt-to-equity ratio lower than the industry median, a current price of at least 4.5 billion and a 57.44% average earnings surprise over four quarters [16][17] - The Greenbrier Companies (GBX): Reported net earnings of $55 million with a 12.8% operating margin, and a long-term earnings growth rate of 11.7% [18][19] - EZCORP (EZPW): Achieved a 14% year-over-year increase in adjusted net income and a 7% rise in revenues for Q1 2025, with an 8.2% projected improvement in 2025 sales [20][21]