For immediate release
Chicago, IL – March 31, 2023 – Compania Cervecerias Unidas SA CCU, PVH Corp. MORE
5 Value Stocks with Alluring EV-to-EBITDA Ratios
The price-to-earnings (P/E) multiple is popular among investors looking for a stock to trade. In addition to being a widely used tool for screening stocks, P/E is a popular metric for working out the market value of a firm. But even this widely used multiplex assessment has a few downsides.
While P/E enjoys great popularity among the value population, a less used and more complex metric called EV-to-EBITDA is sometimes considered better. EV-to-EBITDA provides a true picture of a company’s valuation and earnings potential. It has a more comprehensive approach to evaluation.
Cervecerias Unidas SA, PVH Corp., Concrete Pumping Holdings, Inc., Ranger Energy Services, Inc. and ePlus Inc. There are some stocks with attractive EV-to-EBITDA ratios.
EV-to-EBITDA Is a Better Option, Here’s ‘Why’
EV-to-EBITDA is essentially the enterprise value (EV) divided by its earnings before interest, taxes, depreciation and amortization (EBITDA). EV is the sum of market capitalization, debt and preferred stock less cash and cash equivalents.
The other component of the composite, EBITDA, provides a better measure of a company’s profitability because it removes the impact of non-cash expenses such as depreciation and amortization that reduce net earnings. It is also often used as a proxy for cash.
Generally, the lower the EV-EBITDA ratio, the more attractive it is. A low EV-to-EBITDA ratio could indicate that the stock is potentially undervalued.
EV-to-EBITDA takes into account the debt ratio on the company’s balance sheet which the P/E ratio does not. For this reason, EV-to-EBITDA is commonly used to show potential acquisition targets how much debt the acquisition should assume. A more nerve-wracking low EV-EBITDA-to-EBITDA multiple may seem like an attractive takeover candidate.
P/E also cannot be used to confirm the loss. The firm’s fees are also subject to appraisals and management techniques. On the other hand, EV-to-EBITDA is harder to manipulate and is used to value companies with negative net earnings but positive EBITDA front.
EV-to-EBITDA is also a useful tool for measuring the value of firms that are very lean and have high volatility. In addition, it can be used to compare companies with different levels of debt.
However, EV-to-EBITDA is not without its shortcomings and alone cannot determine a stock’s inherent potential and future performance. The multiple varies across industries and is generally not appropriate when comparing stocks in different industries, given their different capital expenditure requirements.
Therefore, instead of relying only on EV-to-EBITDA, you can surround it with other major ratios, such as price-to-book (P/B), P/E and price-to-sales (P/S) to achieve the desired result.
Here are our top five picks from the 10 sticks that went through the tent;
United Breweries Company is a multinational beverage company with various businesses and operations. You can see that this Zacks Rank #1 stock has a value score of B the list of today’s Zacks # I Rank stocks here.
Compania Cervecerias Unidas expects annual profit growth of 65.7% for the current year. The Zacks Consensus Estimate for CCU’s current year earnings over the past 60 days has been revised up 13.7%.
HPV specializing in the design and marketing of branded clothing, shirts, collars, sportswear, jeanswear, underwear, swim products, shoes, needles and related products. This Zacks Rank #2 stock has a value score of A.
The Zacks Consensus Estimate for PVH’s current fiscal year earnings has been revised up 0.6% over the past 60 days. Its earnings have beaten the Zacks Consensus Estimate in each of the last four quarters. Trailing four-quarter gains were a surprising 23.4%, on average.
Concrete Pump Holdings is a leading provider of concrete services developers and concrete waste management services in the United States and UK markets. This Zacks Rank #2 stock has a value score of A.
Concrete Pumping Holdings has an expected annual earnings growth of 43.2% for the current year. The Zacks Consensus Estimate for BBCP’s current year earnings over the past 60 days has been revised up 15.2%.
Ranger Energy Services is a leading provider of high-specification mobile well rigs, wireline drilling rigs, and ancillary services to the US oil and gas industry. This Zacks Rank #2 stock has a value score of A.
Ranger Energy Services has an expected annual profit of 192.1% for the current year. The Zacks Consensus Estimate for RNGR’s current-year earnings over the past 60 days has been revised up 8.2%.
ePlus Inc. is a leading provider of technical solutions to help organizations optimize their infrastructure and supply chain processes. This Zacks Rank #2 stock has a value score of B.
ePlus has an expected annual earnings growth of 7.7% for the current fiscal year. The Zacks Consensus Estimate for PLUS’s current fiscal year earnings has been revised up 6.8% over the past 60 days.
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Research Wizard is a great place to start. Easy to use. Everything is flat in the conversation. And it’s very intuitive. Start your Research Wizard trial today. The next time you read a financial report, open the Research Wizard, plug in your findings and see what gems come out.
For the rest of this week’s screenshot article, please visit Zacks.com at: https://www.zacks.com/stock/news/2072264/5-value-stocks-with-alluring-ev-to-ebitda-ratios-to-own-now
Disclosure: Officers, directors and/or employees of Zacks Investments may have or have sold securities short and/or hold long and/or short positions in the options listed in this material. Federal investment advisory firms may own or sell securities short and/or hold long and/or short positions in the options listed in this material.
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