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5 Value Stocks With Exciting EV-to-EBITDA Ratios to Snap Up Now
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Key Takeaways
EV-to-EBITDA offers a fuller view of valuation by accounting for debt, unlike traditional P/E ratios.
AZZ, PAGP, BOOM, MRC and GBX are screened as value stocks with low EV-to-EBITDA ratios.
Each stock meets strict criteria, including valuation, trading volume, price, growth, and Value Score.
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.
While P/E is by far the most popular equity valuation ratio, a more complicated metric called EV-to-EBITDA does a better job of valuing a firm. Often viewed as a better substitute for P/E, this ratio offers a clearer picture of a company’s valuation and its earnings potential.
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, which the P/E ratio does not. For 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 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 loss-making but EBITDA-positive companies. 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. It can be used to compare companies with different levels of debt.
But EV-to-EBITDA has its limitations, too. The ratio varies across industries (a high-growth industry typically has a higher multiple and vice versa). It is usually not appropriate when comparing stocks in different industries, given their diverse capital 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.
Screening Criteria
Here are the parameters to screen for value stocks:
EV-to-EBITDA 12 Months-Most Recent less than X-Industry Median: A lower EV-to-EBITDA ratio represents a cheaper valuation.
P/E using (F1) less than X-Industry Median: This metric screens stocks that are trading at a discount to their peers.
P/B less than X-Industry Median: A lower P/B compared with the industry average implies that the stock is undervalued.
P/S less than X-Industry Median: The lower the P/S ratio, the more attractive the stock is, as investors will have to pay a smaller price for the same amount of sales generated by the company.
Estimated One-Year EPS Growth F(1)/F(0) greater than or equal to X-Industry Median: This parameter will help in screening stocks that have growth rates higher than the industry median.
Average 20-day Volume greater than or equal to 100,000: The addition of this metric ensures that shares can be traded easily.
Current Price greater than or equal to $5: This parameter will help in screening stocks that are trading at a minimum price of $5 or higher.
Zacks Rank less than or equal to 2: It is a fundamental truth that stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have always managed to beat adversities and outperform the market.
Value Score of less than or equal to B: Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Here are our five picks out of the 20 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 15.8% for fiscal 2026. AZZ beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters at an average of 8.1%.
Plains GP Holdings, through its subsidiaries, is involved in the transportation, storage, terminalling and marketing of crude oil and refined products. 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.
Plains GP Holdings has an expected year-over-year earnings growth rate of 205.8% for 2025. The consensus estimate for PAGP's 2025 earnings has been revised 18.7% upward over the past 60 days.
DMC Global owns and operates innovative, asset-light manufacturing businesses that offer highly engineered products and differentiated solutions. This Zacks Rank #1 stock has a Value Score of A.
DMC Global has an expected year-over-year earnings growth rate of 280% for 2025. The consensus estimate for BOOM's 2025 earnings has been stable over the past 60 days.
MRC Global is one of the leading distributors of pipes, valves, fittings, and related products and services. This Zacks Rank #2 stock has a Value Score of A.
MRC Global has an expected earnings growth rate of 31.8% for 2025. The Zacks Consensus Estimate for MRC’s 2025 earnings has been revised 1.2% higher over the past 60 days.
The Greenbrier Companies is a leading supplier of transportation equipment and services to the railroad and related industries. This Zacks Rank #2 stock has a Value Score of A.
The Greenbrier Companies has an expected year-over-year earnings growth rate of 33.1% for fiscal 2025. The consensus estimate for GBX’s fiscal 2025 earnings has been revised 28.2% 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.
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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5 Value Stocks With Exciting EV-to-EBITDA Ratios to Snap Up Now
Key Takeaways
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.
While P/E is by far the most popular equity valuation ratio, a more complicated metric called EV-to-EBITDA does a better job of valuing a firm. Often viewed as a better substitute for P/E, this ratio offers a clearer picture of a company’s valuation and its earnings potential.
AZZ Inc. (AZZ - Free Report) , Plains GP Holdings, L.P. (PAGP - Free Report) , DMC Global Inc. (BOOM - Free Report) , MRC Global Inc. (MRC - Free Report) and The Greenbrier Companies, Inc. (GBX - Free Report) are some stocks with impressive EV-to-EBITDA ratios.
Is EV-to-EBITDA a Better Substitute for 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, which the P/E ratio does not. For 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 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 loss-making but EBITDA-positive companies. 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. It can be used to compare companies with different levels of debt.
But EV-to-EBITDA has its limitations, too. The ratio varies across industries (a high-growth industry typically has a higher multiple and vice versa). It is usually not appropriate when comparing stocks in different industries, given their diverse capital 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.
Screening Criteria
Here are the parameters to screen for value stocks:
EV-to-EBITDA 12 Months-Most Recent less than X-Industry Median: A lower EV-to-EBITDA ratio represents a cheaper valuation.
P/E using (F1) less than X-Industry Median: This metric screens stocks that are trading at a discount to their peers.
P/B less than X-Industry Median: A lower P/B compared with the industry average implies that the stock is undervalued.
P/S less than X-Industry Median: The lower the P/S ratio, the more attractive the stock is, as investors will have to pay a smaller price for the same amount of sales generated by the company.
Estimated One-Year EPS Growth F(1)/F(0) greater than or equal to X-Industry Median: This parameter will help in screening stocks that have growth rates higher than the industry median.
Average 20-day Volume greater than or equal to 100,000: The addition of this metric ensures that shares can be traded easily.
Current Price greater than or equal to $5: This parameter will help in screening stocks that are trading at a minimum price of $5 or higher.
Zacks Rank less than or equal to 2: It is a fundamental truth that stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have always managed to beat adversities and outperform the market.
Value Score of less than or equal to B: Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Here are our five picks out of the 20 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 15.8% for fiscal 2026. AZZ beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters at an average of 8.1%.
Plains GP Holdings, through its subsidiaries, is involved in the transportation, storage, terminalling and marketing of crude oil and refined products. 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.
Plains GP Holdings has an expected year-over-year earnings growth rate of 205.8% for 2025. The consensus estimate for PAGP's 2025 earnings has been revised 18.7% upward over the past 60 days.
DMC Global owns and operates innovative, asset-light manufacturing businesses that offer highly engineered products and differentiated solutions. This Zacks Rank #1 stock has a Value Score of A.
DMC Global has an expected year-over-year earnings growth rate of 280% for 2025. The consensus estimate for BOOM's 2025 earnings has been stable over the past 60 days.
MRC Global is one of the leading distributors of pipes, valves, fittings, and related products and services. This Zacks Rank #2 stock has a Value Score of A.
MRC Global has an expected earnings growth rate of 31.8% for 2025. The Zacks Consensus Estimate for MRC’s 2025 earnings has been revised 1.2% higher over the past 60 days.
The Greenbrier Companies is a leading supplier of transportation equipment and services to the railroad and related industries. This Zacks Rank #2 stock has a Value Score of A.
The Greenbrier Companies has an expected year-over-year earnings growth rate of 33.1% for fiscal 2025. The consensus estimate for GBX’s fiscal 2025 earnings has been revised 28.2% 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.
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.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.