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Zacks.com highlights: PennyMac Mortgage Investment Trust, Atlas Air Worldwide Holdings, Boise Cascade, UGI and Covenant Transportation Group

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For Immediate Release

Chicago, IL – June 13, 2018 - Stocks in this week’s article include: PennyMac Mortgage Investment Trust (PMT - Free Report) , Atlas Air Worldwide Holdings, Inc. (AAWW - Free Report) , Boise Cascade Company (BCC - Free Report) , UGI Corporation (UGI - Free Report) and Covenant Transportation Group, Inc. (CVTI - Free Report) .

Screen of the Week of Zacks Investment Research:

5 Value Stocks with Enticing EV/EBITDA Ratios to Own Now

Value investors generally tend to cling to the price-to-earnings (P/E) strategy while looking for stocks that are trading at a bargain. Undoubtedly, P/E is the most popular multiple used by investors for assessing the fair market value of a stock. However, even this straightforward, broadly used valuation metric suffers a few downsides.

EV/EBITDA is a Better Option, Here’s Why?

Although P/E is the most commonly used tool for evaluating a firm’s value, another valuation metric called EV/EBITDA works even better. The ratio is often viewed as a better alternative to P/E as it offers a clearer image of a company’s valuation and its earnings potential. EV/EBITDA also has a more complete approach to valuation. Unlike P/E, which solely considers a company’s equity portion, EV/EBITDA determines its total value.

EV/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. Simply put, it is the total value of a firm.

The other element, EBITDA gives the true picture of a firm’s profitability as it eliminates the impact of non-cash expenses like depreciation and amortization that dilute net earnings.

Usually, the lower the EV/EBITDA ratio, the more attractive it is. A low EV/EBITDA ratio could imply that a stock is potentially undervalued and vice versa.

EV/EBITDA also takes into account the debt on a company’s balance sheet that P/E ratio ignores. For this reason, EV/EBITDA is usually used to value possible acquisition targets. Stocks with a low EV/EBITDA multiple could be seen as potential takeover candidates.

Another major shortcoming of P/E is that it can’t be used to value a loss-making entity. Moreover, a firm’s earnings are subject to accounting estimates and management manipulation. In contrast, EV/EBITDA EV/EBITDA is less open to manipulation and can also be used to value companies that are making loss but are EBITDA-positive.

Moreover, EV/EBITDA is a useful tool in assessing the value of companies that are highly leveraged and have a high degree of depreciation. The ratio also allows the comparison of companies with different debt levels.

However, EV/EBITDA is not without its flaws and it alone can’t conclusively determine a stock’s inherent potential and future performance. It varies across industries (a high-growth industry normally has higher multiple and vice versa) and is typically not appropriate while comparing stocks in different industries given their diverse capital expenditure requirements.

Thus, instead of solely banking on EV/EBITDA, you can combine it with the other major ratios such as price-to-book (P/B), P/E and price-to-sales (P/S) to screen true value stocks.

And that's what we're screening for today…

For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/307376/5-value-stocks-with-enticing-evebitda-ratios-to-own-now

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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.

About Screen of the Week

Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine.  But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.

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