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Zacks.com featured highlights M/I Homes, PVH, Concrete Pumping, Telefonica Brasil and Ranger Energy

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For Immediate Release

Chicago, IL – May 4, 2023 – Stocks in this week’s article are M/I Homes, Inc. (MHO - Free Report) , PVH Corp. (PVH - Free Report) , Concrete Pumping Holdings, Inc. (BBCP - Free Report) , Telefonica Brasil S.A. (VIV - Free Report) and Ranger Energy Services, Inc. (RNGR - Free Report) .

5 Stocks with Impressive EV-to-EBITDA Ratios to Scoop Up

The price-to-earnings (P/E) ratio is broadly considered the yardstick for evaluating the fair market value of a stock. It is preferred by many investors while handpicking stocks trading at attractive prices. However, even this universally used valuation multiple is not without its limitations.

Although P/E enjoys huge 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.

M/I Homes, Inc., PVH Corp., Concrete Pumping Holdings, Inc., Telefonica Brasil S.A. and Ranger Energy Services, Inc. are some stocks with attractive EV-to-EBITDA ratios.

Is EV-to-EBITDA a Better Substitute to P/E?

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 component of the multiple, gives a better idea of a company’s profitability as it removes the impact of non-cash expenses like depreciation and amortization that reduce net earnings. It is also often used as a proxy for cash flows.

Usually, 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.

However, unlike the P/E ratio, EV-to-EBITDA takes into account the debt on a company’s balance sheet. Given this reason, EV-to-EBITDA is usually used to value the possible acquisition targets. Stocks with a low EV-to-EBITDA multiple could be seen as potential takeover candidates.

P/E also can’t be used to value a loss-making firm. A firm’s earnings are also subject to accounting estimates and management manipulation. In contrast, EV-to-EBITDA is harder to manipulate and can be used to value companies with negative net earnings but are positive on the EBITDA front.

EV-to-EBITDA is also a useful tool in measuring 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 alone cannot 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.

Therefore, instead of just relying on EV-to-EBITDA, you can club it with the other major ratios such as price-to-book (P/B), P/E and price-to-sales (P/S) to achieve the desired results.

Here are our five picks out of the seven stocks that passed the screen:

M/I Homes is one of leading builders of single-family homes. This Zacks Rank #1 stock has a Value Score of B.

The Zacks Consensus Estimate for M/I Homes’s current-year earnings has been revised 11.5% upward over the last 60 days. MHO’s earnings beat the Zacks Consensus Estimate in each of the last four quarters at an average of around 30%.

PVH specializes in designing and marketing branded dress shirts, neckwear, sportswear, jeanswear, intimate apparel, swim products, footwear, handbags and related products. This Zacks Rank #2 stock has a Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

PVH has an expected year-over-year earnings growth rate of 11.8% for the current year. The Zacks Consensus Estimate for PVH’s current fiscal-year earnings has been revised 13.6% upward over the past 60 days.

Concrete Pumping Holdings is a leading provider of concrete pumping and concrete waste management services in the United States and U.K. markets.  This Zacks Rank #2 stock has a Value Score of A.

Concrete Pumping Holdings has an expected year-over-year earnings growth rate of 43.2% for the current year. The Zacks Consensus Estimate for BBCP’s current-year earnings has been revised 15.2% upward over the past 60 days.

Telefonica Brasil is engaged in providing communication, information and entertainment solutions in the telecommunication sector. This Zacks Rank #2 stock has a Value Score of A.

Telefonica Brasil has an expected year-over-year earnings growth rate of 10.6% for the current year. The Zacks Consensus Estimate for VIV’s current-year earnings has been revised 10.6% upward over the past 60 days.

Ranger Energy Services is a leading provider of high-specification mobile rig well services, cased-hole wireline services, and ancillary services in the U.S. oil and gas industry. This Zacks Rank #2 stock has a Value Score of A.

Ranger Energy Services has an expected year-over-year earnings growth rate of 192.1% for the current year. The Zacks Consensus Estimate for RNGR’s current-year earnings has been revised 8.2% 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.

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For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2088777/5-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.

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