4 Stocks With Strong Coverage Ratios to Buy in a Tight Market

In a market that feels “tight” — meaning investors are more sensitive to interest rates, debt costs, and balance-sheet risk — it’s not enough to glance at revenue or headline earnings and call it a day. When borrowing costs are elevated, companies with shaky debt service can get squeezed fast. That’s why many analysts shift attention to coverage ratios, especially the interest coverage ratio, to see how comfortably a business can pay interest on its debt from operating profits.

According to a recent market commentary carried by Nasdaq and attributed to Zacks Investment Research, four companies stood out for having impressive interest coverage ratios: Casey’s General Stores, Brinker International, Cardinal Health, and Flowserve. The same commentary also notes the broader market backdrop: major indexes ended lower as investors weighed the implications of President Donald Trump’s nominee to chair the Federal Reserve.

Why “Coverage Ratios” Matter More When Markets Feel Tight

Think of a company like a household. If your monthly bills rise (rent, loan payments, credit-card interest), you’ll feel it more if your income is unstable. Corporations experience something similar: debt can be useful for growth, but it comes with interest expense — and that expense directly affects profitability and flexibility.

The interest coverage ratio is designed to answer a simple question: How easily can this company pay the interest on its debt? The classic formula is:

Interest Coverage Ratio = EBIT ÷ Interest Expense

Where EBIT is “earnings before interest and taxes,” a measure of operating profitability before financing costs and taxes.

In plain English:

• If the ratio is below 1, the business may not be generating enough operating profit to cover its interest costs (a red flag).
• If the ratio is well above 1, the company has a larger “buffer” to keep paying interest even if profits dip.
• Many investors view higher coverage as a sign of stronger financial resilience, although what counts as “good” can vary by industry.

Also, it’s smart to look at the trend over time. A company improving its coverage ratio might be strengthening operations, refinancing debt, or lowering interest costs. A declining ratio can signal the opposite — rising debt costs or weakening profits.

What the Screen Looked For: A Simple “Quality + Liquidity” Checklist

The Nasdaq-carried commentary outlines a screening approach that tries to combine balance-sheet safety (coverage ratios) with practical trading considerations (price and volume), plus forward-looking earnings growth signals.

Here’s the screening logic, rewritten in straightforward terms:

Screen Component	What It Tries to Solve	Why It Matters
Interest coverage above industry median	Find firms that handle debt costs better than peers	Higher relative resilience if rates stay higher
Stock price ≥ $5	Avoid ultra-low-priced names	Reduces exposure to extreme volatility/liquidity issues
Strong historical EPS growth	Confirm a track record of earnings progress	Suggests the business can execute over time
Projected EPS growth above industry median	Look for forward momentum	Markets often reward improving earnings power
20-day average volume > 100,000	Ensure tradability	More liquidity, easier entry/exit for many investors
Zacks Rank #1 or #2	Preference for favorable analyst/estimate signals	Historically tied (by Zacks) to outperformance claims
VGM Score A or B	Blend value, growth, and momentum factors	Tries to avoid “one-metric” decision-making

That screen reportedly produced a list of qualifying stocks, and the commentary highlighted four of them.

Stock #1: Casey’s General Stores (CASY)

What the company does

Casey’s General Stores is described as a leading convenience store chain in the United States. Convenience retail can look “simple” on the surface, but the best operators often win through scale, disciplined expansion, and strong execution in everyday categories like prepared food and fuel-linked traffic.

Why it stood out in the screen

The commentary notes that Casey’s carried a favorable ranking in the screen (including a top Zacks Rank) and delivered a strong average earnings surprise over the trailing four quarters. In analyst-speak, “earnings surprise” means the company’s reported earnings came in above consensus estimates more often than not.

Growth signals mentioned

Based on the same commentary, the consensus outlook implied year-over-year growth in sales and earnings per share for the current financial year, and the stock had risen substantially over the past year.

How interest coverage fits the story

In a rate-sensitive environment, a retailer with solid interest coverage may have more flexibility to keep investing — upgrading stores, improving supply chains, expanding locations, and managing inventory — without feeling cornered by debt costs. That doesn’t guarantee success, but it can reduce one major type of risk: being forced to cut growth spending just to keep up with interest payments.

Stock #2: Cardinal Health (CAH)

What the company does

Cardinal Health is described as a global healthcare company involved in pharmaceutical distribution and the manufacturing and supply of medical and laboratory products. Healthcare supply chains are often judged on reliability and scale, and that kind of operational footprint can matter when economic conditions get choppy.

Why it stood out in the screen

The commentary highlights that Cardinal Health matched the screen’s preferred ranking/score combination and posted a positive average earnings surprise across the trailing four quarters.

Growth signals mentioned

It also points to consensus expectations for sales and EPS growth in the current financial year and notes the stock’s strong performance over the past year.

How to interpret “coverage strength” for a healthcare distributor

Healthcare-related firms can be defensive in certain market regimes, but they still face cost pressures, contract dynamics, and operational complexity. A strong interest coverage ratio can indicate that the company’s operating engine (its EBIT) is giving it enough room to service debt without sacrificing core execution — a key advantage if capital markets tighten further.

Stock #3: Brinker International (EAT)

What the company does

Brinker International is described as one of the leading casual dining restaurant companies. Restaurants are often sensitive to consumer behavior — and when people feel stressed by prices, rates, or job uncertainty, they may dine out less often or trade down.

Why it still qualified

Even with the consumer-facing risk, the screen emphasized financial and earnings factors: the commentary notes Brinker carried a favorable rank/score combination and produced an average earnings surprise over the trailing four quarters.

Growth signals mentioned

The same write-up states that consensus expectations called for sales and EPS growth in the current financial year, although it also notes the stock’s weaker one-year performance relative to some of the others on the list.

What “strong interest coverage” can mean for a restaurant operator

For a restaurant company, strong interest coverage can be a sign that operating profit is high enough to handle financing costs even if traffic slows or costs rise. This matters because restaurant operators often deal with tight margins, wage pressures, and shifting input costs. When debt is manageable, leadership can focus on improving menus, operations, and customer value rather than scrambling to restructure financing.

Stock #4: Flowserve (FLS)

What the company does

Flowserve is described as a leading provider of flow control products and services for global infrastructure markets. Companies tied to industrial and infrastructure demand can benefit from long-cycle projects, but they also face cyclical swings depending on capex and energy/industrial activity.

Why it stood out in the screen

The commentary notes Flowserve carried the screen’s preferred rank/score mix and posted a solid trailing four-quarter earnings surprise average.

Growth signals mentioned

It also highlights consensus expectations for sales growth and especially strong EPS growth for the current financial year, alongside positive one-year stock performance.

Why coverage ratios matter in industrial markets

Industrial firms often need to invest in manufacturing capacity, service capabilities, and working capital. If interest coverage is strong, it can be easier to keep investing through the cycle — and potentially take advantage when weaker competitors pull back. In other words, coverage strength can turn into strategic flexibility.

Putting It All Together: What This List Is (and Isn’t)

It’s important to keep the framing honest. This “four stock” list is not a guarantee of future returns. It’s a snapshot of names that fit a particular screen emphasizing:

• Debt service comfort (interest coverage stronger than the industry median)
• Liquidity basics (price and volume thresholds)
• Earnings strength (historical and projected EPS growth)
• Ranking/factor blend (Zacks Rank and VGM Score)

Also, while the interest coverage ratio is helpful, it’s not the only “debt safety” measure worth tracking. Investors often pair it with:

• Total debt levels (and how they’ve changed over time)
• Debt maturity schedule (when big repayments come due)
• Free cash flow (cash generation after expenses and capex)
• Operating margin trends (are profits expanding or shrinking?)

Still, when markets feel tight and rates matter more, coverage ratios can act like a quick “stress test” on a company’s ability to keep control of its financial obligations. That’s exactly why the metric gets extra attention in these environments.

A Clear, Practical Explanation of Interest Coverage (Simple Example)

Here’s a simple way to visualize the ratio without heavy math:

Imagine a company earns $1,000 in EBIT (operating profit before interest and taxes) and pays $200 in interest expense for the same period.

Interest coverage = 1,000 ÷ 200 = 5

That means, in theory, the company’s operating profit could pay its interest bill five times over. If business slows and EBIT falls, a company starting with a “5” might have more breathing room than a company starting with “1.2.” This is why the ratio is also called “times interest earned.”

Key Takeaways for Readers Watching a Rate-Sensitive Market

If you’re following the market and trying to reduce avoidable risk, this style of screening offers a few sensible lessons:

• Don’t ignore the balance sheet. Revenue growth is nice, but debt costs can quietly undo it.
• Prefer “breathing room” when rates are high. Interest coverage is one quick way to gauge that breathing room.
• Compare within industries. A “good” ratio in one sector may look different in another.
• Mix quality with tradability. Basic liquidity filters (price and volume) can prevent unnecessary trading friction.

Bottom line: The four highlighted names — Casey’s, Cardinal Health, Brinker International, and Flowserve — were presented as examples of companies with impressive interest coverage ratios in a market environment where debt costs and financial durability matter more.

FAQs

1) What is an interest coverage ratio in simple words?

It’s a measure of how easily a company can pay the interest on its debt using its operating profit. A higher number generally means the company has more room to handle its interest payments.

2) What formula is used for interest coverage ratio?

The standard formula is EBIT ÷ interest expense.

3) Why does interest coverage matter more when rates are high?

When rates rise, borrowing and refinancing can become more expensive. Companies with weaker coverage may struggle sooner because a bigger share of profit is consumed by interest costs.

4) Is an interest coverage ratio below 1 always bad?

It’s usually a warning sign because it suggests operating profit may not cover interest expense. However, context matters (temporary swings, one-time costs, or unusual accounting periods can distort the metric).

5) Are the four stocks mentioned guaranteed “buys”?

No. The list is based on a screening approach and highlights companies that meet certain criteria. It’s a starting point for research, not a promise of future performance.

6) What else should I check besides interest coverage ratio?

Many investors also review total debt levels, cash flow, debt maturities, operating margins, and business-specific risks (like demand cycles, competition, and pricing power).

Conclusion

When markets are wrestling with uncertainty and interest rates remain a major storyline, financial durability becomes a bigger part of the investing conversation. Coverage ratios — especially interest coverage — help reveal whether a company’s profits are strong enough to carry its debt costs without losing strategic flexibility.

In that context, the Nasdaq-carried Zacks commentary highlighted four names with impressive interest coverage ratios: Casey’s General Stores (CASY), Cardinal Health (CAH), Brinker International (EAT), and Flowserve (FLS). Whether you’re an active trader or a long-term investor, the key idea is the same: in a tight market, it often pays to understand the balance sheet as well as the income statement.

Disclosure note: This rewritten article is for informational purposes only and is not financial advice.

Source basis: This content is a detailed rewrite and expansion based on a market commentary published via Nasdaq and attributed to Zacks Investment Research.

Mentioned entities:Casey’s General Stores, Cardinal Health, Brinker International, Flowserve, the Federal Reserve, and broader market indexes such as the S&P 500.

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