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Zacks.com featured highlights AZZ, Heartland Financial, CEMEX, Noah and ASE Technology
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For Immediate Release
Chicago, IL – January 16, 2024 – Stocks in this week’s article are AZZ Inc. (AZZ - Free Report) , Heartland Financial USA, Inc. (HTLF - Free Report) , CEMEX, S.A.B. de C.V. (CX - Free Report) , Noah Holdings Ltd. (NOAH - Free Report) and ASE Technology Holding Co., Ltd. (ASX - Free Report) .
5 Value 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 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.
AZZ Inc., Heartland Financial USA, Inc., CEMEX, S.A.B. de C.V., Noah Holdings Ltd. and ASE Technology Holding Co., Ltd. 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.
Just like P/E, the lower the EV-to-EBITDA ratio, the more attractive it is. A low EV-to-EBITDA ratio could signal 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 shortcoming of P/E is that it can’t be used to value a loss-making firm. 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 making losses but are EBITDA-positive.
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.
A strategy solely based on EV-to-EBITDA might not yield the desired results. However, 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 11 stocks that passed the screen:
AZZ is a global provider of metal coating services, welding solutions, specialty electrical equipment and highly engineered services. This Zacks Rank #1 stock has a Value Score of A.
AZZ has an expected year-over-year earnings growth rate of 20.4% for fiscal 2024. The Zacks Consensus Estimate for AZZ’s current fiscal-year earnings has been revised 2.2% upward over the last 60 days.
Heartland Financial is a bank holding company that conducts its business through multiple community banks operating as either independent entities or independently branded divisions in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado, Minnesota, Kansas, Missouri, Texas and California. 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.
Heartland Financial has an expected earnings growth rate of 0.7% for 2024. The Zacks Consensus Estimate for HTLF's 2024 earnings has been revised 8.8% upward over the past 60 days.
CEMEX is a global construction materials company. This Zacks Rank #2 stock has a Value Score of A.
CEMEX has an expected year-over-year earnings growth rate of 38.8% for 2024. The Zacks Consensus Estimate for CX’s 2024 earnings has been revised 3.3% upward over the last 60 days.
Noah Holdings is a leading wealth management service provider in China. NOAH, a Zacks Rank #2 stock, has a Value Score of A.
Noah Holdings has an expected year-over-year earnings growth rate of 17.6% for 2024. The consensus estimate for NOAH’s 2024 earnings has been revised 2% upward over the past 60 days.
ASE Technology is a provider of semiconductor manufacturing services in assembly and testing. This Zacks Rank #2 stock has a Value Score of A.
ASE Technology has an expected year-over-year earnings growth rate of 58.7% for 2024. The Zacks Consensus Estimate for ASX’s 2024 earnings has been revised 5.8% upward over the last 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.
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/performance for information about the performance numbers displayed in this press release.
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Zacks.com featured highlights AZZ, Heartland Financial, CEMEX, Noah and ASE Technology
For Immediate Release
Chicago, IL – January 16, 2024 – Stocks in this week’s article are AZZ Inc. (AZZ - Free Report) , Heartland Financial USA, Inc. (HTLF - Free Report) , CEMEX, S.A.B. de C.V. (CX - Free Report) , Noah Holdings Ltd. (NOAH - Free Report) and ASE Technology Holding Co., Ltd. (ASX - Free Report) .
5 Value 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 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.
AZZ Inc., Heartland Financial USA, Inc., CEMEX, S.A.B. de C.V., Noah Holdings Ltd. and ASE Technology Holding Co., Ltd. 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.
Just like P/E, the lower the EV-to-EBITDA ratio, the more attractive it is. A low EV-to-EBITDA ratio could signal 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 shortcoming of P/E is that it can’t be used to value a loss-making firm. 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 making losses but are EBITDA-positive.
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.
A strategy solely based on EV-to-EBITDA might not yield the desired results. However, 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 11 stocks that passed the screen:
AZZ is a global provider of metal coating services, welding solutions, specialty electrical equipment and highly engineered services. This Zacks Rank #1 stock has a Value Score of A.
AZZ has an expected year-over-year earnings growth rate of 20.4% for fiscal 2024. The Zacks Consensus Estimate for AZZ’s current fiscal-year earnings has been revised 2.2% upward over the last 60 days.
Heartland Financial is a bank holding company that conducts its business through multiple community banks operating as either independent entities or independently branded divisions in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado, Minnesota, Kansas, Missouri, Texas and California. 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.
Heartland Financial has an expected earnings growth rate of 0.7% for 2024. The Zacks Consensus Estimate for HTLF's 2024 earnings has been revised 8.8% upward over the past 60 days.
CEMEX is a global construction materials company. This Zacks Rank #2 stock has a Value Score of A.
CEMEX has an expected year-over-year earnings growth rate of 38.8% for 2024. The Zacks Consensus Estimate for CX’s 2024 earnings has been revised 3.3% upward over the last 60 days.
Noah Holdings is a leading wealth management service provider in China. NOAH, a Zacks Rank #2 stock, has a Value Score of A.
Noah Holdings has an expected year-over-year earnings growth rate of 17.6% for 2024. The consensus estimate for NOAH’s 2024 earnings has been revised 2% upward over the past 60 days.
ASE Technology is a provider of semiconductor manufacturing services in assembly and testing. This Zacks Rank #2 stock has a Value Score of A.
ASE Technology has an expected year-over-year earnings growth rate of 58.7% for 2024. The Zacks Consensus Estimate for ASX’s 2024 earnings has been revised 5.8% upward over the last 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/2209981/5-value-stocks-with-impressive-ev-to-ebitda-ratios-to-scoop-up
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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.
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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/performance for information about the performance numbers displayed in this press release.