For Immediate Release
Chicago, IL – July 8, 2022 – Stocks in this week’s article are United Natural Foods, Inc. (
UNFI Quick Quote UNFI - Free Report) , PBF Energy Inc. ( PBF Quick Quote PBF - Free Report) , Plains GP Holdings, L.P. ( PAGP Quick Quote PAGP - Free Report) , ArcBest Corporation ( ARCB Quick Quote ARCB - Free Report) and SM Energy Co. ( SM Quick Quote SM - Free Report) . 5 Stocks with Impressive EV-to-EBITDA Ratios to Scoop Up
Price-to-earnings (P/E), given its inherent simplicity, is the most commonly used metric in the value investing world. It is preferred by many investors while handpicking stocks trading at attractive prices. However, even this straightforward, broadly-used valuation metric has a few limitations.
While P/E enjoys great popularity among value investors, a less-used and more-complicated metric called EV-to-EBITDA is sometimes viewed as a better alternative. EV-to-EBITDA gives the true picture of a company's valuation and earnings potential. It has a more comprehensive approach to valuation.
United Natural Foods, Inc., PBF Energy Inc., Plains GP Holdings, L.P., ArcBest Corporation and SM Energy Co. are some stocks with attractive EV-to-EBITDA ratios. EV/EBITDA a Better Approach: Here's Why
EV-to-EBITDA is essentially the enterprise value (EV) of a stock divided by its earnings before interest, taxes, depreciation and amortization (EBITDA). EV is the sum of a company's market capitalization, its debt and preferred stock minus cash and cash equivalents.
EBITDA, the other constituent of the ratio, gives a clearer picture of a company's profitability as it removes the impact of non-cash expenses like depreciation and amortization that dampen net earnings. It is also often used as a proxy for cash flows.
Just like P/E, the lower the EV-to-EBITDA ratio, the more appealing it is. A low EV-to-EBITDA ratio could be a sign that a stock is potentially undervalued.
EV-to-EBITDA takes into account the debt on a company's balance sheet that the P/E ratio does not. Due to this reason, EV-to-EBITDA is generally used to value the potential acquisition targets as it shows the amount of debt the acquirer has to assume. Stocks boasting a low EV-to-EBITDA multiple could be seen as attractive takeover candidates.
Another key downside of P/E is that it can't be used to value a loss-making entity. Moreover, a company's earnings are also subject to accounting estimates and management manipulation. On the other hand, EV-to-EBITDA is difficult to manipulate and can also be used to value companies incurring losses but are EBITDA-positive.
EV-to-EBITDA is also a useful yardstick in evaluating the value of firms that are highly leveraged and have a high degree of depreciation. Moreover, it can be used to compare companies with different levels of debt.
However, EV-to-EBITDA is not devoid of shortcomings and it alone can't conclusively determine a stock's inherent potential and future performance. The multiple varies across industries and is usually not appropriate while comparing stocks in different industries, given their diverse capital expenditure requirements.
As such, a strategy solely based on EV-to-EBITDA might not yield the desired results. But you can club it with the other major ratios in your stock-investing toolbox such as price-to-book (P/B), P/E and price-to-sales (P/S) to screen value stocks.
Here are our five picks out of the 19 stocks that passed the screen: United Natural Foods is a leading distributor of natural, organic and specialty food and non-food products in the United States and Canada. This Zacks Rank #1 stock has a Value Score of A.
United Natural Foods has an expected year-over-year earnings growth rate of 3.6% for the current fiscal year. UNFI's earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 29.9%.
PBF Energy provides end products that comprise heating oil, transportation fuels, lubricants and many related products. This Zacks Rank #1 stock has a Value Score of A. You can see . the complete list of today's Zacks #1 Rank stocks here
PBF Energy has an expected earnings growth rate of 383.6% for the current year. The Zacks Consensus Estimate for PBF's current-year earnings has been revised 34.5% upward over the past 60 days.
Plains GP Holdings, through its subsidiaries, is involved in the transportation, storage, terminalling, and marketing of crude oil and refined products. This Zacks Rank #2 stock has a Value Score of A.
Plains GP Holdings has an expected year-over-year earnings growth rate of 209.7% for the current year. The consensus estimate for PAGP's current-year earnings has been revised 29.7% upward over the past 60 days.
ArcBest provides freight transportation services and solutions. This Zacks Rank #2 stock has a Value Score of A.
ArcBest has an expected earnings growth rate of 58.9% for the current year. The Zacks Consensus Estimate for ARCB's current-year earnings has been revised 5.1% upward over the past 60 days.
SM Energy is an independent oil and gas company engaged in the exploration, exploitation, development, acquisition and production of natural gas and crude oil in North America. This Zacks Rank #2 stock has a Value Score of A.
SM Energy has an expected earnings growth rate of 387.6% for the current year. The Zacks Consensus Estimate for SM's current-year earnings has been revised 7.1% upward over the past 60 days.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
. Click here to sign up for a free trial to the Research Wizard today For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1949028/5-stocks-with-impressive-ev-to-ebitda-ratios-to-scoop-up Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year.
See these high-potential stocks free >>.
Follow us on Twitter:
Join us on Facebook:
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Contact: Jim Giaquinto
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit
https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.