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Pick These 5 Bargain Stocks With Alluring EV-to-EBITDA Ratios
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Key Takeaways
EV-to-EBITDA offers a fuller view of valuation by accounting for debt, unlike traditional P/E ratios.
BOOM, DINO, CVE, ZIM and PKX are screened as bargain stocks with low EV-to-EBITDA ratios.
Each stock meets strict criteria, including valuation, trading volume, price, growth, and Value Score.
Investors generally have a fixation on the price-to-earnings (P/E) strategy while seeking stocks trading at attractive prices. This straightforward, easy-to-calculate ratio is the most preferred among the valuation metrics in the investment toolkit for working out the fair market value of a stock. But even this ubiquitously used valuation metric is not without its pitfalls.
Although the popularity of P/E stems from its simplicity, a more complicated and less-used metric called EV-to-EBITDA is often viewed as a better option, as it offers a clearer picture of a company’s valuation and earnings potential. EV-to-EBITDA has a more complete approach to valuation as it determines a firm’s total value. In contrast, P/E only considers a firm’s equity portion.
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.
Usually, the lower the EV-to-EBITDA ratio, the more appealing 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.
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 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.
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.
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 bargain stocks.
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 50,000: 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 19 stocks that passed the screen:
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 200% for 2026. The Zacks Consensus Estimate for BOOM's 2026 earnings has been revised 266.7% upward over the past 60 days.
HF Sinclair is an independent energy company producing and marketing gasoline, diesel, jet fuel, renewable diesel, lubricants and specialty 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.
HF Sinclair has an expected year-over-year earnings growth rate of 341.1% for 2026. The Zacks Consensus Estimate for DINO’s 2026 earnings has moved up 88.4% over the past 60 days.
Cenovus Energy is a leading integrated energy firm with operations comprising marketing of produced oil, natural gas and natural gas liquids. This Zacks Rank #1 stock has a Value Score of A.
Cenovus Energy has an expected year-over-year earnings growth rate of 167.5% for 2026. The consensus estimate for CVE’s 2026 earnings has been revised 20.5% upward over the past 60 days.
ZIM Integrated Shipping Services is a global container liner shipping company. This Zacks Rank #1 stock has a Value Score of A.
ZIM Integrated Shipping Services has an expected year-over-year earnings growth rate of 187.6% for the current year. The Zacks Consensus Estimate for ZIM’s current-year earnings has been revised 181.3% higher over the past 60 days.
POSCO manufactures and markets a wide range of steel products, including hot-rolled sheets, plates, wire rods, cold-rolled sheets, galvanized sheets and stainless steel. This Zacks Rank #2 stock has a Value Score of A.
POSCO has an expected year-over-year earnings growth rate of 258% for 2026. The Zacks Consensus Estimate for PKX’s 2026 earnings has moved up 4.3% over the past 60 days.
View the Zacks #1 Rank List
Image: Bigstock
Pick These 5 Bargain Stocks With Alluring EV-to-EBITDA Ratios
Key Takeaways
Investors generally have a fixation on the price-to-earnings (P/E) strategy while seeking stocks trading at attractive prices. This straightforward, easy-to-calculate ratio is the most preferred among the valuation metrics in the investment toolkit for working out the fair market value of a stock. But even this ubiquitously used valuation metric is not without its pitfalls.
Although the popularity of P/E stems from its simplicity, a more complicated and less-used metric called EV-to-EBITDA is often viewed as a better option, as it offers a clearer picture of a company’s valuation and earnings potential. EV-to-EBITDA has a more complete approach to valuation as it determines a firm’s total value. In contrast, P/E only considers a firm’s equity portion.
DMC Global Inc. (BOOM - Free Report) , HF Sinclair Corporation (DINO - Free Report) , Cenovus Energy Inc. (CVE - Free Report) , ZIM Integrated Shipping Services Ltd. (ZIM - Free Report) and POSCO Holdings Inc. (PKX - Free Report) 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.
Usually, the lower the EV-to-EBITDA ratio, the more appealing 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.
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 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.
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.
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 bargain stocks.
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 50,000: 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 19 stocks that passed the screen:
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 200% for 2026. The Zacks Consensus Estimate for BOOM's 2026 earnings has been revised 266.7% upward over the past 60 days.
HF Sinclair is an independent energy company producing and marketing gasoline, diesel, jet fuel, renewable diesel, lubricants and specialty 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.
HF Sinclair has an expected year-over-year earnings growth rate of 341.1% for 2026. The Zacks Consensus Estimate for DINO’s 2026 earnings has moved up 88.4% over the past 60 days.
Cenovus Energy is a leading integrated energy firm with operations comprising marketing of produced oil, natural gas and natural gas liquids. This Zacks Rank #1 stock has a Value Score of A.
Cenovus Energy has an expected year-over-year earnings growth rate of 167.5% for 2026. The consensus estimate for CVE’s 2026 earnings has been revised 20.5% upward over the past 60 days.
ZIM Integrated Shipping Services is a global container liner shipping company. This Zacks Rank #1 stock has a Value Score of A.
ZIM Integrated Shipping Services has an expected year-over-year earnings growth rate of 187.6% for the current year. The Zacks Consensus Estimate for ZIM’s current-year earnings has been revised 181.3% higher over the past 60 days.
POSCO manufactures and markets a wide range of steel products, including hot-rolled sheets, plates, wire rods, cold-rolled sheets, galvanized sheets and stainless steel. This Zacks Rank #2 stock has a Value Score of A.
POSCO has an expected year-over-year earnings growth rate of 258% for 2026. The Zacks Consensus Estimate for PKX’s 2026 earnings has moved up 4.3% over the past 60 days.