Chicago, IL – April 29, 2025 – Stocks in this week’s article are Sterling Infrastructure, Inc. STRL, Stride, Inc. LRN, BJ's Wholesale Club Holdings, Inc. BJ and Philip Morris International Inc. PM.
4 Stocks with Remarkable Interest Coverage Ratios
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.
Sterling Infrastructure, Inc., Stride, Inc., BJ's Wholesale Club Holdings, Inc. and Philip Morris International Inc. have impressive interest coverage ratios.
Why 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.
Here are four of the 12 stocks that qualified the screening:
Sterling Infrastructure, which is engaged in e-infrastructure, transportation and building solutions, sports a Zacks Rank #1 and has a VGM Score of B. Sterling Infrastructure delivered a trailing four-quarter earnings surprise of 16.2%, 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 EPS suggests growth of 34.6% from a year ago. The stock has surged 43.5% in the past year.
Stride, a technology-based education company, sports a Zacks Rank #1 and has a VGM Score of A. LRN has a trailing four-quarter earnings surprise of 97.8%, on average.
The Zacks Consensus Estimate for Stride’s current financial year sales and EPS implies growth of 14.9% and 48.4%, respectively, from the year-ago period. The stock has soared 107.5% in the past year. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
BJ's Wholesale Club Holdings, a leading operator of membership warehouse clubs, carries a Zacks Rank #2 and has a VGM Score of B. BJ has a trailing four-quarter earnings surprise of 12%, on average.
The Zacks Consensus Estimate for BJ's Wholesale Club’s current financial year sales and EPS indicates growth of 5.8% and 4.4%, respectively, from the year-ago period. The stock has advanced 48.3% in the past year.
Philip Morris, which operates as a tobacco company, carries a Zacks Rank #2 and has a VGM Score of B. PM has a trailing four-quarter earnings surprise of 3.6%, on average.
The Zacks Consensus Estimate for Philip Morris’ current financial year sales and EPS suggests growth of 7.3% and 13.2%, respectively, from the year-ago period. The stock has rallied 86.1% in the past year.
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