Now’s The Time For S&P 500 Companies Lever Up: Goldman

S&P 500 (INDEXSP:.INX) companies should enhance leverage to arrest their declining margins and return on equity, believes Goldman Sachs Group Inc (NYSE:GS).

Stuart Kaiser and team at Goldman Sachs think that by taking advantage of the prevailing low financing costs, S&P 500 companies should return asset / equity leverage to its 10-year average.

Leverage – an easy way to protect ROE

Goldman Sachs analysts have poured over 30 years of data and concluded that stocks with weaker balance sheets have steadily outperformed peers with safer balance sheets. Historically S&P 500 (INDEXSP:.INX) companies have increased debt (relative to sales, enterprise value and EBITDA) when ROE began to ease.

The following graph highlights the analysts' view that ex-Financials companies...