Advertisement
UK markets closed
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • FTSE 250

    19,884.73
    +74.07 (+0.37%)
     
  • AIM

    743.26
    +1.15 (+0.15%)
     
  • GBP/EUR

    1.1715
    +0.0021 (+0.18%)
     
  • GBP/USD

    1.2624
    +0.0002 (+0.02%)
     
  • Bitcoin GBP

    55,446.55
    -313.31 (-0.56%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • DOW

    39,807.37
    +47.29 (+0.12%)
     
  • CRUDE OIL

    83.11
    -0.06 (-0.07%)
     
  • GOLD FUTURES

    2,254.80
    +16.40 (+0.73%)
     
  • NIKKEI 225

    40,369.44
    +201.37 (+0.50%)
     
  • HANG SENG

    16,541.42
    +148.58 (+0.91%)
     
  • DAX

    18,492.49
    +15.40 (+0.08%)
     
  • CAC 40

    8,205.81
    +1.00 (+0.01%)
     

Zacks.com featured highlights: ArcBest, Prudential Financial, Summit Hotel Properties, TTM Technologies and Popular

For Immediate Release

Chicago, IL – January 11, 2017 - Stocks in this week’s article include ArcBest Corporation (NASDAQ: ARCB – Free Report ), Prudential Financial, Inc. (NYSE: PRU – Free Report ), Summit Hotel Properties, Inc. (NYSE: INN – Free Report ), TTM Technologies, Inc. (NASDAQ: TTMI – Free Report ) and Popular, Inc. (NASDAQ: BPOP – Free Report ).

Screen of the Week of Zacks Investment Research:

5 Value Stocks with Amazingly Low EV/EBITDA Ratios

Investors typically tend to cling to the price-to-earnings (P/E) strategy while seeking stocks that are trading at bargain prices. Undoubtedly, P/E is the most popular multiple used by investors for assessing the fair market value of a stock. However, even this straightforward, easy-to-calculate metric has a few downsides.

ADVERTISEMENT

What Makes EV/EBITDA a Better Alternative?

While P/E is the most commonly used equity valuation ratio in the market, a more complicated valuation metric called EV/EBITDA is often viewed as a better alternative as it offers a clearer picture of a firm’s valuation and its earnings potential. EV/EBITDA determines the total value of a company while P/E just considers its equity portion.

Also called enterprise multiple, EV/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. In a nutshell, it is the entire value of a company.

EBITDA, the other element of the ratio, gives the true picture of a firm’s profitability as it eliminates 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.

Typically, the lower the EV/EBITDA ratio, the more appealing it is. A low EV/EBITDA ratio could imply that a stock is undervalued.

However, unlike P/E ratio, EV/EBITDA takes debt on a company’s balance sheet into account. For this reason, EV/EBITDA is usually used to value possible acquisition targets, as it shows the amount of debt the acquirer has to assume. Stocks with low EV/EBITDA multiple could be seen as attractive takeover candidates.

Another limitation of P/E is that it can’t be used to value a loss-making entity. A firm’s earnings are also subject to accounting estimates and management manipulation. EV/EBITDA, in contrast, is hard to manipulate and can also be used to value companies that have negative net earnings but are positive on the EBITDA front.

EV/EBITDA is also a useful yardstick in assessing the value of companies with a debt-laden balance sheet as well as significant depreciation and amortization expenses. The ratio also allows the comparison of firms with different debt levels.

Then again, EV/EBITDA has its flaws too. It alone cannot conclusively determine a stock’s inherent potential and its future performance. The ratio varies across industries and is generally not appropriate while comparing stocks in different industries given their diverse capital expenditure requirements.

Thus, instead of solely banking on EV/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 value stocks:

EV/EBITDA 12 Months-Most Recent less than X-Industry Median: A lower EV/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. This is a meaningful indicator as decent earnings growth always adds to investor optimism.

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: No screening is complete without the Zacks Rank, which has proven its worth since inception. 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 Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or 2 offer the best upside potential.

Here are five of the 12 stocks that passed the screen:

ArcBest Corporation (NASDAQ:ARCB – Free Report ) provides freight transportation services and solutions globally. This Zacks Rank #1 stock has expected year-over-year earnings growth of 79.4% for 2017.

Prudential Financial, Inc. (NYSE:PRU – Free Report ) is one of the largest financial services institutions in the U.S. It offers a wide range of insurance, investment management and other financial products and services. This Zacks Rank #2 stock has an expected EPS growth rate of 8.5% for 3 to 5 years.

Summit Hotel Properties, Inc. (NYSE:INN – Free Report ) is a publicly traded real estate investment trust focused mainly on owning premium-branded, select-service hotels in the upscale and upper midscale segments of the lodging industry. This Zacks Rank #2 stock delivered an average positive earnings surprise of around 11.7% over the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

TTM Technologies, Inc. (NASDAQ:TTMI – Free Report ) provides time-critical, one-stop manufacturing services for the highly complex printed circuit boards. This Zacks Rank #2 company delivered an average positive earnings surprise of around 29% over the trailing four quarters.

Popular, Inc. (NASDAQ:BPOP – Free Report ) is a diversified, publicly owned bank holding company. This Zacks Rank #2 stock has expected year-over-year earnings growth of 17.6% for 2017.

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 .

Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »

Sign up now for your free trial today and start picking better stocks immediately. And with the backtesting feature, you can test your ideas to see how you can improve your trading in both up markets and down markets. Don’t wait for the market to get better before you decide to do better. Start learning how to be a better trader today: https://at.zacks.com/?id=111

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. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here https://at.zacks.com/?id=112

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros .

Get the full Report on ARCB - FREE

Get the full Report on PRU - FREE

Get the full Report on INN - FREE

Get the full Report on TTMI - FREE

Get the full Report on BPOP - FREE

Follow us on Twitter: https://twitter.com/zacksresearch

Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch

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: https://www.zacks.com/performance

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.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
ArcBest Corporation (ARCB): Free Stock Analysis Report
 
Prudential Financial, Inc. (PRU): Free Stock Analysis Report
 
Summit Hotel Properties, Inc. (INN): Free Stock Analysis Report
 
TTM Technologies, Inc. (TTMI): Free Stock Analysis Report
 
Popular, Inc. (BPOP): Free Stock Analysis Report
 
To read this article on Zacks.com click here.