We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Zacks.com featured highlights Covenant Logistics Group, TravelCenters of America, SpartanNash, Greif and Patrick Industries
Read MoreHide Full Article
For Immediate Release
Chicago, IL – August 26, 2022 – Stocks in this week’s article are Covenant Logistics Group, Inc. (CVLG - Free Report) , TravelCenters of America Inc. , SpartanNash Company (SPTN - Free Report) , Greif, Inc. (GEF - Free Report) and Patrick Industries, Inc. (PATK - Free Report) .
Tap 5 Bargain Stocks with Incredibly Low EV/EBITDA Ratios
Investors generally have a fixation on the price-to-earnings (P/E) strategy while seeking stocks trading at attractive prices. This straight-forward, easy-to-calculate ratio is the most preferred among all the valuation metrics in the investment toolkit for working out the fair market value of a stock. But even this ubiquitously used valuation metric is not without its pitfalls.
Although P/E is the most popular valuation metric, a more complicated multiple called EV-to-EBITDA works even better. Often considered a better alternative to P/E, it gives the true picture of a company’s valuation and earnings potential, and has a more complete approach to valuation. While P/E considers a firm’s equity portion, EV-to-EBITDA determines its total value.
Covenant Logistics Group, Inc., TravelCenters of America Inc., SpartanNash Company, Greif, Inc. and Patrick Industries, Inc. are some stocks with attractive EV-to-EBITDA ratios.
EV-to-EBITDA is a Better Substitute, Here’s Why
Also referred to as enterprise multiple, EV-to-EBITDA is 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. In essence, it is the entire value of a company.
EBITDA, the other element of the ratio, gives a clearer picture of a company’s profitability as it strips out non-cash expenses like depreciation and amortization that reduce net earnings. It is also often used as a proxy for cash flows.
Generally, the lower the EV-to-EBITDA ratio, the more enticing it is. A low EV-to-EBITDA ratio could indicate that a stock is potentially undervalued.
Unlike P/E ratio, EV-to-EBITDA takes debt on a company’s balance sheet into account. Due to this reason, EV-to-EBITDA is generally used to value potential acquisition targets as it shows the amount of debt the acquirer has to assume. Stocks flaunting a low EV-to-EBITDA multiple could be seen as attractive takeover candidates.
Another major drawback of P/E is that it can’t be used to value a loss-making entity. A firm’s earnings are also subject to accounting estimates and management manipulation. In contrast, EV-to-EBITDA is less amenable to manipulation and can also be used to value companies that are making loss but are EBITDA-positive.
EV-to-EBITDA is also a useful tool for 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 also not without its shortcomings and alone cannot conclusively determine a stock’s inherent potential and future performance. The ratio varies across industries and is generally not appropriate while comparing stocks in different industries, given their diverse capital spending requirements.
Hence, a strategy entirely based on EV-to-EBITDA might not yield the desired results. But you can club it with other major ratios such as price-to-book (P/B), P/E and price-to-sales (P/S) to screen bargain stocks.
Here are our five picks out of the 16 stocks that passed the screen:
Covenant Logistics, together with its subsidiaries, offers a portfolio of transportation and logistics services. CVLG, a Zacks Rank #1 stock, has a Value Score of A.
Covenant Logistics has an expected year-over-year earnings growth rate of 50.4% for the current year. The Zacks Consensus Estimate for CVLG's current-year earnings has been revised 18.6% upward over the last 60 days.
TravelCenters of America is the largest publicly traded full-service travel center network in the United States. TA, flaunting a Zacks Rank #1, has a Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
TravelCenters of America has an expected year-over-year earnings growth of 83.9% for the current year. The consensus estimate for TA’s current-year earnings has been revised 113.6% upward over the last 60 days.
SpartanNash distributes grocery products to a diverse group of independent and chain retailers, its corporate-owned retail stores, and U.S. military commissaries and exchanges. This Zacks Rank #2 stock has a Value Score of A.
SpartanNash has an expected earnings growth rate of 36.5% for the current year. The Zacks Consensus Estimate for SPTN's current-year earnings has been revised 0.9% upward over the past 60 days.
Greif is a leading global producer of industrial packaging products and services. This Zacks Rank #2 stock has a Value Score of A.
Greif has an expected year-over-year earnings growth rate of 36.8% for the current fiscal year. The Zacks Consensus Estimate for GEF's current fiscal-year earnings has been revised 0.4% upward over the past 60 days.
Patrick Industries is a leading component solutions provider for the recreational vehicle, marine and manufactured housing industries. This Zacks Rank #2 stock has a Value Score of A.
Patrick Industries has an expected year-over-year earnings growth rate of 36.6% for the current year. The Zacks Consensus Estimate for PATK’s current-year earnings has been revised 1.2% 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.
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 >>.
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.
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. www.zacks.com/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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Shutterstock
Zacks.com featured highlights Covenant Logistics Group, TravelCenters of America, SpartanNash, Greif and Patrick Industries
For Immediate Release
Chicago, IL – August 26, 2022 – Stocks in this week’s article are Covenant Logistics Group, Inc. (CVLG - Free Report) , TravelCenters of America Inc. , SpartanNash Company (SPTN - Free Report) , Greif, Inc. (GEF - Free Report) and Patrick Industries, Inc. (PATK - Free Report) .
Tap 5 Bargain Stocks with Incredibly Low EV/EBITDA Ratios
Investors generally have a fixation on the price-to-earnings (P/E) strategy while seeking stocks trading at attractive prices. This straight-forward, easy-to-calculate ratio is the most preferred among all the valuation metrics in the investment toolkit for working out the fair market value of a stock. But even this ubiquitously used valuation metric is not without its pitfalls.
Although P/E is the most popular valuation metric, a more complicated multiple called EV-to-EBITDA works even better. Often considered a better alternative to P/E, it gives the true picture of a company’s valuation and earnings potential, and has a more complete approach to valuation. While P/E considers a firm’s equity portion, EV-to-EBITDA determines its total value.
Covenant Logistics Group, Inc., TravelCenters of America Inc., SpartanNash Company, Greif, Inc. and Patrick Industries, Inc. are some stocks with attractive EV-to-EBITDA ratios.
EV-to-EBITDA is a Better Substitute, Here’s Why
Also referred to as enterprise multiple, EV-to-EBITDA is 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. In essence, it is the entire value of a company.
EBITDA, the other element of the ratio, gives a clearer picture of a company’s profitability as it strips out non-cash expenses like depreciation and amortization that reduce net earnings. It is also often used as a proxy for cash flows.
Generally, the lower the EV-to-EBITDA ratio, the more enticing it is. A low EV-to-EBITDA ratio could indicate that a stock is potentially undervalued.
Unlike P/E ratio, EV-to-EBITDA takes debt on a company’s balance sheet into account. Due to this reason, EV-to-EBITDA is generally used to value potential acquisition targets as it shows the amount of debt the acquirer has to assume. Stocks flaunting a low EV-to-EBITDA multiple could be seen as attractive takeover candidates.
Another major drawback of P/E is that it can’t be used to value a loss-making entity. A firm’s earnings are also subject to accounting estimates and management manipulation. In contrast, EV-to-EBITDA is less amenable to manipulation and can also be used to value companies that are making loss but are EBITDA-positive.
EV-to-EBITDA is also a useful tool for 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 also not without its shortcomings and alone cannot conclusively determine a stock’s inherent potential and future performance. The ratio varies across industries and is generally not appropriate while comparing stocks in different industries, given their diverse capital spending requirements.
Hence, a strategy entirely based on EV-to-EBITDA might not yield the desired results. But you can club it with other major ratios such as price-to-book (P/B), P/E and price-to-sales (P/S) to screen bargain stocks.
Here are our five picks out of the 16 stocks that passed the screen:
Covenant Logistics, together with its subsidiaries, offers a portfolio of transportation and logistics services. CVLG, a Zacks Rank #1 stock, has a Value Score of A.
Covenant Logistics has an expected year-over-year earnings growth rate of 50.4% for the current year. The Zacks Consensus Estimate for CVLG's current-year earnings has been revised 18.6% upward over the last 60 days.
TravelCenters of America is the largest publicly traded full-service travel center network in the United States. TA, flaunting a Zacks Rank #1, has a Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
TravelCenters of America has an expected year-over-year earnings growth of 83.9% for the current year. The consensus estimate for TA’s current-year earnings has been revised 113.6% upward over the last 60 days.
SpartanNash distributes grocery products to a diverse group of independent and chain retailers, its corporate-owned retail stores, and U.S. military commissaries and exchanges. This Zacks Rank #2 stock has a Value Score of A.
SpartanNash has an expected earnings growth rate of 36.5% for the current year. The Zacks Consensus Estimate for SPTN's current-year earnings has been revised 0.9% upward over the past 60 days.
Greif is a leading global producer of industrial packaging products and services. This Zacks Rank #2 stock has a Value Score of A.
Greif has an expected year-over-year earnings growth rate of 36.8% for the current fiscal year. The Zacks Consensus Estimate for GEF's current fiscal-year earnings has been revised 0.4% upward over the past 60 days.
Patrick Industries is a leading component solutions provider for the recreational vehicle, marine and manufactured housing industries. This Zacks Rank #2 stock has a Value Score of A.
Patrick Industries has an expected year-over-year earnings growth rate of 36.6% for the current year. The Zacks Consensus Estimate for PATK’s current-year earnings has been revised 1.2% 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/1972307/tap-5-bargain-stocks-with-incredibly-low-evebitda-ratios
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: https://www.twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch
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
Company: Zacks.com
Phone: 312-265-9268
Email: pr@zacks.com
Visit: https://www.zacks.com/
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. www.zacks.com/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.