Price-to-earnings (P/E) is hands down the most commonly used metric in the value investing world. This straightforward, easy-to-calculate ratio enjoys greater popularity among valuation metrics in the investment toolkit and is preferred while uncovering bargain stocks. A widely favored approach by value investors is to chase stocks with a low P/E ratio. But even this ubiquitously used valuation multiple has a few downsides.

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.

Par Pacific Holdings, Inc. (PARR Quick QuotePARR - Free Report) , Amkor Technology, Inc. (AMKR Quick QuoteAMKR - Free Report) , Kohl's Corporation (KSS Quick QuoteKSS - Free Report) , Avnet, Inc. (AVT Quick QuoteAVT - Free Report) and Ecovyst Inc. (ECVT Quick QuoteECVT - Free Report) are some stocks with attractive EV-to-EBITDA ratios.

Why EV/EBITDA Is a Better Approach?

Also dubbed as the 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, gives a clearer picture of a company’s profitability by removing the impact of non-cash expenses such as depreciation and amortization that dampen net earnings. It is also often used as a proxy for cash flows. 

Typically, the lower the EV-to-EBITDA ratio, the more enticing it is. A low EV-to-EBITDA ratio could indicate that a stock is 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 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. 

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. Moreover, it can be used to compare companies with different levels of debt.

EV-to-EBITDA is not devoid of limitations and alone cannot conclusively determine a stock’s inherent potential and future performance. The multiple varies across industries and is usually not appropriate when comparing stocks in different industries, given their diverse capital expenditure requirements.

Thus, 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.

Screening Criteria

Here are the parameters to screen for bargain 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 16 stocks that passed the screen:

Par Pacific Holdings is a growth-oriented energy company supplying conventional and renewable fuels across the western United States. This Zacks Rank #1 company has a Value Score of A. 

Par Pacific Holdings has an expected year-over-year earnings growth rate of 182.1% for 2026. The Zacks Consensus Estimate for PARR’s 2026 earnings has moved up 30.8% over the past 60 days.

Amkor Technology is a leading provider of semiconductor packaging and test services. 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.

Amkor Technology has an expected year-over-year earnings growth rate of 73.3% for 2026. The consensus estimate for AMKR’s 2026 earnings has moved up 25% over the past 60 days.

Kohl’s is a U.S.-based department store retailer, offering moderately priced apparel, footwear and accessories for women, men and children, along with beauty and home products. This Zacks Rank #1 stock has a Value Score of A. 

Kohl’s has an expected year-over-year earnings growth rate of 11.1% for the current fiscal year. The Zacks Consensus Estimate for KSS’s current fiscal-year earnings has been revised 30.4% higher over the last 60 days.

Avnet is one of the world’s largest distributors of electronic components and computer products. This Zacks Rank #1 stock has a Value Score of A. 

Avnet has an expected year-over-year earnings growth rate of 84.3% for the current fiscal year. The consensus estimate for AVT’s current fiscal-year earnings has been revised 43.2% upward over the past 60 days.

Ecovyst is a leading provider of regenerated sulfuric acid, virgin sulfuric acid, and sulfur dioxide and related derivatives. This Zacks Rank #2 stock has a Value Score of A. 

Ecovyst has an expected year-over-year earnings growth rate of 75% for 2026. The Zacks Consensus Estimate for ECVT’s 2026 earnings has moved up 6.1% over the past 60 days.