Why Savvy Investors Are Turning to Low-Leverage Equities in Today's Volatile Market

2025-12-23 17:37:05

July 17, 2025 brought encouraging signals to Wall Street. Retail sales climbed 0.6% in June—a reversal from May’s 0.9% drop and beating forecasts—while unemployment claims ticked downward. Tech giants like Netflix posted stellar earnings, lifting all three major indices. Yet beneath this optimism lies a crucial reality: market uncertainty remains elevated. This is precisely why investors should pivot toward low-leverage stocks that offer downside protection.

Understanding Financial Leverage and Portfolio Risk

When companies finance operations through debt rather than equity, they’re employing leverage—a double-edged sword. Debt is cheaper and more readily available than equity capital, but it demands regular repayment regardless of business performance. The problem intensifies during economic downturns: a company that seemed profitable in good times can quickly unravel if debt obligations exceed cash flow.

This is where the debt-to-equity ratio becomes your shield. The formula is simple:

Debt-to-Equity Ratio = Total Liabilities ÷ Shareholders’ Equity

A lower ratio signals stronger financial footing. Companies burdened with excessive debt face amplified risk during recessions—their earnings might evaporate, but their debt obligations won’t. By contrast, low-leverage stocks cushion against sudden market shocks.

The Screening Framework: What We Look For

Rather than relying on a single metric, we applied rigorous filters to identify resilient stocks:

Below-Industry Debt/Equity Levels: Only firms less leveraged than peers
Price Floor of $10+: Ensuring institutional-quality securities
Daily Trading Volume ≥50,000 Shares: Guaranteeing liquidity
EPS Growth Outpacing Sector: Forward momentum indicators
VGM Score A or B: Valuation, growth, and momentum alignment
Projected 12-Month EPS Growth >5%: Earnings trajectory confirmation
Zacks Rank #1 or #2: Analyst consensus strength

From 16 qualifying candidates, here are our five picks:

Five Low-Leverage Stocks Worth Considering

Novartis (NVS) leads with pharmaceutical diversification. Q2 2025 results revealed net sales growth of 12% year-over-year and EPS expansion of 29%. Full-year 2025 sales are projected to climb 9.3% from 2024 levels. The company targets 15.30% long-term earnings growth. Currently rated Zacks Rank #2.

ResMed (RMD) dominates respiratory and sleep-disorder solutions globally. The manufacturer expects to report fourth-quarter fiscal 2025 results on July 31, 2025. Consensus forecasts Q4 revenue growth of 8.1% year-over-year, with quarterly earnings estimates lifting by 2 cents over the prior quarter. Fiscal 2026 earnings are anticipated to improve 7.5% annually. Long-term growth trajectory stands at 15.3%. Holds Zacks Rank #2.

Wabtec (WAB) powers the rail and industrial sectors. A July 10, 2025 distribution partnership expansion with Intermodal Telematics broadens its European footprint for telematics solutions. The company projects 2025 sales advancing 5.3% from 2024, underpinned by 16% long-term earnings growth. Maintains Zacks Rank #2.

Elbit Systems (ESLT) supplies advanced defense technologies to U.S. military branches. June 2025 saw the launch of PAWS-2 (HR), a next-generation infrared warning system protecting fighter aircraft in high-threat zones. 2025 sales estimates suggest 13.8% improvement year-over-year. The stock boasts a four-quarter average earnings surprise of 21.12%. Carries Zacks Rank #2.

Ingredion (INGR) specializes in plant-based ingredients and clean-label solutions. October 2025 marks an expanded distribution partnership with Univar Solutions across the Benelux region, bringing innovative starches, plant proteins, and stevia-based sweeteners to market. 2025 sales are expected to rise 1% from 2024 levels. Long-term earnings growth runs at 11%. Currently rated Zacks Rank #2.

The Takeaway

Market strength today doesn’t guarantee tomorrow’s stability. By focusing on low-leverage stocks with solid fundamentals and analyst backing, investors can build portfolios that weather volatility while capturing upside during recovery periods. The five firms highlighted above represent a balanced approach to growth without excessive financial risk.

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