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Zacks.com featured highlights PagSeguro Digital, American Vanguard, Designer Brands, Navios Maritime and Empire State Realty
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For Immediate Release
Chicago, IL – March 20, 2024 – Stocks in this week’s article are PagSeguro Digital Ltd. (PAGS - Free Report) , American Vanguard Corp. (AVD - Free Report) , Designer Brands Inc. (DBI - Free Report) , Navios Maritime Partners L.P. (NMM - Free Report) and Empire State Realty Trust, Inc. (ESRT - Free Report) .
5 Value Stocks with Enticing EV-to-EBITDA Ratios to Own Now
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.
PagSeguro Digital Ltd., American Vanguard Corp., Designer Brands Inc., Navios Maritime Partners L.P. and Empire State Realty Trust, Inc. are some stocks with impressive 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 14 stocks that passed the screen:
PagSeguro Digital provides financial technology solutions and services for micro-merchants and small and medium-sized businesses in Brazil and internationally. This Zacks Rank #1 stock has a Value Score of A.
PagSeguro Digital has an expected year-over-year earnings growth rate of 17.4% for 2024. The Zacks Consensus Estimate for PAGS’s 2024 earnings has been revised 8.5% upward over the past 60 days.
American Vanguard has an expected year-over-year earnings growth rate of 173.1% for 2024. The Zacks Consensus Estimate for AVD’s 2024 earnings has been revised 4.4% upward over the past 60 days.
Designer Brands designs, produces and retails footwear and accessories. This Zacks Rank #2 stock has a Value Score of A.
Designer Brands has an expected year-over-year earnings growth rate of 15.4% for 2024. DBI delivered a trailing four-quarter earnings surprise of 103.7%, on average.
Navios Maritime Partners is an international owner and operator of dry cargo vessels. This Zacks Rank #2 stock has a Value Score of A.
Navios Maritime Partners has an expected earnings growth rate of 12.9% for 2024. The Zacks Consensus Estimate for NMM’s 2024 earnings has been revised 6.6% upward over the past 60 days.
Empire State Realty Trust is a leading real estate investment trust. This Zacks Rank #2 stock has a Value Score of B.
Empire State Realty Trust has an expected year-over-year earnings growth rate of 1.1% for 2024. The Zacks Consensus Estimate for ESRT’s 2024 earnings has been revised 3.3% 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.
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 PagSeguro Digital, American Vanguard, Designer Brands, Navios Maritime and Empire State Realty
For Immediate Release
Chicago, IL – March 20, 2024 – Stocks in this week’s article are PagSeguro Digital Ltd. (PAGS - Free Report) , American Vanguard Corp. (AVD - Free Report) , Designer Brands Inc. (DBI - Free Report) , Navios Maritime Partners L.P. (NMM - Free Report) and Empire State Realty Trust, Inc. (ESRT - Free Report) .
5 Value Stocks with Enticing EV-to-EBITDA Ratios to Own Now
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.
PagSeguro Digital Ltd., American Vanguard Corp., Designer Brands Inc., Navios Maritime Partners L.P. and Empire State Realty Trust, Inc. are some stocks with impressive 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 14 stocks that passed the screen:
PagSeguro Digital provides financial technology solutions and services for micro-merchants and small and medium-sized businesses in Brazil and internationally. This Zacks Rank #1 stock has a Value Score of A.
PagSeguro Digital has an expected year-over-year earnings growth rate of 17.4% for 2024. The Zacks Consensus Estimate for PAGS’s 2024 earnings has been revised 8.5% upward over the past 60 days.
American Vanguard is a diversified specialty and agricultural products company. 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.
American Vanguard has an expected year-over-year earnings growth rate of 173.1% for 2024. The Zacks Consensus Estimate for AVD’s 2024 earnings has been revised 4.4% upward over the past 60 days.
Designer Brands designs, produces and retails footwear and accessories. This Zacks Rank #2 stock has a Value Score of A.
Designer Brands has an expected year-over-year earnings growth rate of 15.4% for 2024. DBI delivered a trailing four-quarter earnings surprise of 103.7%, on average.
Navios Maritime Partners is an international owner and operator of dry cargo vessels. This Zacks Rank #2 stock has a Value Score of A.
Navios Maritime Partners has an expected earnings growth rate of 12.9% for 2024. The Zacks Consensus Estimate for NMM’s 2024 earnings has been revised 6.6% upward over the past 60 days.
Empire State Realty Trust is a leading real estate investment trust. This Zacks Rank #2 stock has a Value Score of B.
Empire State Realty Trust has an expected year-over-year earnings growth rate of 1.1% for 2024. The Zacks Consensus Estimate for ESRT’s 2024 earnings has been revised 3.3% 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/2242594/5-value-stocks-with-enticing-ev-to-ebitda-ratios-to-own-now
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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.