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Zacks.com featured highlights include: Boise Cascade, USA Truck, PetroChina Co, Berry Global Group and MetLife
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For Immediate Release
Chicago, IL – July 2, 2021 – Stocks in this week’s article are Boise Cascade Company (BCC - Free Report) , USA Truck, Inc. , PetroChina Company Limited , Berry Global Group, Inc. (BERY - Free Report) and MetLife, Inc. (MET - Free Report) .
Pick These 5 Bargain Stocks with Alluring EV-to-EBITDA Ratios
Value investors usually have a fixation with the price-to-earnings (P/E) strategy in their quest for stocks that are trading at a bargain. P/E, without a shadow of doubt, is the most popular multiple used by investors to evaluate the fair market value of a stock. However, even this widely-popular valuation metric is not without its pitfalls.
Is EV-to-EBITDA a Better Substitute to P/E?
Although P/E is preferred by many investors to uncover bargain stocks, a more complicated multiple called EV-to-EBITDA works even better and helps to allay some of the inherent flaws of the former. Often considered as a better alternative to P/E, it gives a true picture of a company's valuation and its earning potential and has a more complete approach to valuation. While P/E just considers a firm's equity portion, EV-to-EBITDA determines its total value.
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, debt and preferred stock minus cash and cash equivalents.
The other constituent of the ratio, EBITDA gives a clearer picture of a company's profitability as it removes the impact of non-cash expenses like depreciation and amortization that dampen 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 appealing it is. A low EV-to-EBITDA ratio could signal that a stock is potentially undervalued.
Unlike the P/E ratio, EV-to-EBITDA takes debt on a company's balance sheet into account. Due to this reason, it is typically used to value potential acquisition targets. The ratio shows the amount of debt the acquirer has to bear. Stocks flaunting a low EV-to-EBITDA multiple could be seen as attractive takeover candidates.
Another key downside of P/E is that it can't be used to value a loss-making entity. Moreover, 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 companies that are making loss but are EBITDA-positive.
EV-to-EBITDA is also a useful tool in measuring the value of companies that are highly leveraged and have a high degree of depreciation. It also allows the comparison of companies with different debt levels.
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.
Thus, instead of solely banking on EV-to-EBITDA, you can club it with other key ratios in your stock investment toolkit such as price-to-book (P/B), P/E and price-to-sales (P/S) to uncover bargain stocks.
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.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks.com featured highlights include: Boise Cascade, USA Truck, PetroChina Co, Berry Global Group and MetLife
For Immediate Release
Chicago, IL – July 2, 2021 – Stocks in this week’s article are Boise Cascade Company (BCC - Free Report) , USA Truck, Inc. , PetroChina Company Limited , Berry Global Group, Inc. (BERY - Free Report) and MetLife, Inc. (MET - Free Report) .
Pick These 5 Bargain Stocks with Alluring EV-to-EBITDA Ratios
Value investors usually have a fixation with the price-to-earnings (P/E) strategy in their quest for stocks that are trading at a bargain. P/E, without a shadow of doubt, is the most popular multiple used by investors to evaluate the fair market value of a stock. However, even this widely-popular valuation metric is not without its pitfalls.
Is EV-to-EBITDA a Better Substitute to P/E?
Although P/E is preferred by many investors to uncover bargain stocks, a more complicated multiple called EV-to-EBITDA works even better and helps to allay some of the inherent flaws of the former. Often considered as a better alternative to P/E, it gives a true picture of a company's valuation and its earning potential and has a more complete approach to valuation. While P/E just considers a firm's equity portion, EV-to-EBITDA determines its total value.
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, debt and preferred stock minus cash and cash equivalents.
The other constituent of the ratio, EBITDA gives a clearer picture of a company's profitability as it removes the impact of non-cash expenses like depreciation and amortization that dampen 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 appealing it is. A low EV-to-EBITDA ratio could signal that a stock is potentially undervalued.
Unlike the P/E ratio, EV-to-EBITDA takes debt on a company's balance sheet into account. Due to this reason, it is typically used to value potential acquisition targets. The ratio shows the amount of debt the acquirer has to bear. Stocks flaunting a low EV-to-EBITDA multiple could be seen as attractive takeover candidates.
Another key downside of P/E is that it can't be used to value a loss-making entity. Moreover, 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 companies that are making loss but are EBITDA-positive.
EV-to-EBITDA is also a useful tool in measuring the value of companies that are highly leveraged and have a high degree of depreciation. It also allows the comparison of companies with different debt levels.
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.
Thus, instead of solely banking on EV-to-EBITDA, you can club it with other key ratios in your stock investment toolkit such as price-to-book (P/B), P/E and price-to-sales (P/S) to uncover bargain stocks.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1756436/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.
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.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Contact: Jim Giaquinto
Company: Zacks.com
Phone: 312-265-9268
Email: pr@zacks.com
Visit: www.Zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.