Is Trading Worth It? How 4 Strong Performers Use Interest Coverage to Build Investor Confidence

When traders scan the market, they often get dazzled by flashy earnings growth and revenue surges. But here’s the real question: is trading worth it if the company you’re betting on is drowning in debt? Four stocks—Amazon (AMZN), Cardinal Health (CAH), Brinker International (EAT), and Stride (LRN)—demonstrate why digging deeper into financial stability, not just headline numbers, separates winners from losers.

The Hidden Risk Most Traders Miss

Revenue and profit figures tell only half the story. A company could crush earnings expectations one quarter, then suddenly face trouble servicing its debt obligations. This is where interest coverage ratio enters the game—it measures whether a company generates enough operating earnings (EBIT) to comfortably cover its interest expenses.

Think of it this way: if a firm’s interest coverage ratio dips below 1.0, it’s essentially burning cash just to pay interest, leaving no margin for financial shocks. Conversely, companies with strong ratios can weather downturns and maintain operational flexibility.

The mathematical simplicity masks real power: Interest Coverage Ratio = EBIT ÷ Interest Expense. A higher number means the company can cover its interest payments multiple times over from operating income alone. That’s financial breathing room.

The Screening Criteria: More Than Just a Single Metric

Relying on one metric for investment decisions is reckless. The winning approach combines multiple filters:

Fundamental Requirements:

• Interest Coverage Ratio exceeding industry median (demonstrates financial resilience)
• Price point at or above $5 (liquidity threshold)
• 5-year and projected EPS growth both surpassing industry median (growth trajectory matters)
• Average 20-day trading volume exceeding 100,000 shares (ensures tradability)

Quality Signals:

• Zacks Rank of #1 (Strong Buy) or #2 (Buy)—historically outperforms regardless of market conditions
• VGM Score of A or B—value, growth, and momentum indicators aligned

Out of 17 stocks meeting these criteria, four stand out:

The Four Players: Real Numbers, Real Context

Amazon carries Zacks Rank #2 with VGM Score B. The tech giant delivers a trailing four-quarter earnings surprise averaging 22.5%—meaning it consistently beats expectations. Current-year forecasts project 12% sales growth and 29.7% EPS expansion year-over-year. Despite market volatility, AMZN has climbed 5.3% over the past 12 months, signaling steady investor confidence in its ability to manage debt while growing profitably.

Cardinal Health demonstrates the most compelling performance with CAH trading with Zacks Rank #2 and VGM Score A. This pharmaceutical and healthcare products distributor posted a trailing four-quarter earnings surprise of 9.4%. Consensus estimates call for 16.3% sales growth and 20% EPS growth this financial year. The stock surged 69.1% over the past year—the strongest performer in this cohort—suggesting the market recognizes its financial fortress.

Brinker International, the casual dining operator, carries Zacks Rank #2 and VGM Score A. EAT averaged an 18.7% trailing earnings surprise, reflecting consistent execution. Analysts project 6.5% sales growth and 14.9% EPS growth, modest but reliable. The stock advanced 15.7% yearly, indicating investors trust the company’s ability to manage restaurant operations and debt simultaneously.

Stride, the edtech company, presents a contrarian play with Zacks Rank #2 and VGM Score B. LRN’s trailing four-quarter surprise averages 12.1%, yet the stock has declined 38.8% over 12 months—possibly due to sector rotation or growth concerns. However, current-year estimates still call for 4.6% sales growth and 3.1% EPS growth. For traders asking “is trading worth it on this name?”, the answer lies in whether you believe the sector recovery narrative.

Why This Approach Works

The fundamental insight: companies with strong interest coverage ratios and positive analyst revisions (Zacks Rank #1-2) typically outperform over multi-year horizons. Since 2000, Zacks’ top strategies have averaged gains of +48.4%, +50.2%, and +56.7% annually—vastly outpacing the S&P 500’s +7.7% baseline.

The combination of:

• Financial stability (interest coverage proves the company can handle obligations)
• Analyst consensus (Zacks Rank reflects institutional conviction)
• Valuation alignment (VGM Score ensures you’re not overpaying)
• Growth catalysts (projected EPS expansion signals future upside)

…creates a framework for distinguishing genuine opportunities from hype.

The Bottom Line

Is trading worth it? Only when you move beyond surface-level metrics and understand what truly keeps companies resilient: the ability to generate earnings faster than debt servicing consumes them. These four stocks exemplify that principle, each in different sectors, proving that strong interest coverage combined with positive analyst sentiment remains a timeless edge in markets.

For traders ready to deepen their analysis, applying this multi-factor screening approach beats chasing quarterly surprises alone.