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Zacks.com featured highlights include Criteo, Citizens Community Bancorp, KB Home, Norsk Hydro and Empire State Realty Trust

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For Immediate Release

Chicago, IL – April 8, 2024 – Stocks in this week’s article are Criteo S.A. (CRTO - Free Report) , Citizens Community Bancorp, Inc. (CZWI - Free Report) , KB Home (KBH - Free Report) , Norsk Hydro ASA (NHYDY - Free Report) and Empire State Realty Trust, Inc. (ESRT - Free Report) .

Pick These 5 Bargain Stocks with Alluring EV-to-EBITDA Ratios

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 a bargain. However, even this straightforward, broadly used valuation metric has a few downsides.

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.

Criteo S.A., Citizens Community Bancorp, Inc., KB Home, Norsk Hydro ASA and Empire State Realty Trust, Inc. are some stocks with attractive EV-to-EBITDA ratios.

EV-to-EBITDA a Better Option. 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 the P/E ratio, EV-to-EBITDA takes debt on a company's balance sheet into account. For this reason, it is typically used to value potential acquisition targets. The ratio shows the amount of debt that the acquirer has to bear. Stocks flaunting a low EV-to-EBITDA multiple could be seen as attractive takeover candidates.

Moreover, P/E 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 that have negative net earnings but are positive on the EBITDA front.

EV-to-EBITDA is also a useful yardstick 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 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.

As such, 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 nine stocks that passed the screen:

Criteo is a commerce media company that enables marketers and media owners to drive better commerce outcomes. This Zacks Rank #1 stock has a Value Score of B.

Criteo has an expected year-over-year earnings growth rate of 11.3% for 2024. The Zacks Consensus Estimate for CRTO's 2024 earnings has been revised 25.1% upward over the past 60 days.

Citizens Community Bancorp is the parent company of Citizens Community Federal N.A. that offers traditional community banking services. This Zacks Rank #1 stock has a Value Score of B. You can see the complete list of today's Zacks #1 Rank stocks here.

The consensus estimate for CZWI's 2024 earnings has been revised 20.6% upward over the past 60 days. It has a trailing four-quarter earnings surprise of roughly 12.2%, on average.

KB Home is one of the largest and most recognized homebuilders in the United States. This Zacks Rank #2 stock has a Value Score of A.

The Zacks Consensus Estimate for KB Home's fiscal 2024 earnings has been revised 4.3% upward over the last 60 days. KBH's earnings beat the Zacks Consensus Estimate in each of the last four quarters at an average of roughly 26.1%.

Norsk Hydro is a leading aluminum and renewable energy company. This Zacks Rank #2 stock has a Value Score of A.

Norsk Hydro has an expected year-over-year earnings growth rate of 25% for 2024. The Zacks Consensus Estimate for NHYDY's 2024 earnings has been revised 4.2% 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/2250993/pick-these-5-bargain-stocks-with-alluring-ev-to-ebitda-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.

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Strong Stocks that Should Be in the News

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