Yahoo Finance Zacks.com featured highlights Compania Cervecerias Unidas, PVH, Concrete Pumping, Ranger Energy Services and ePlus
For Immediate Release
Chicago, IL – March 31, 2023 – Stocks in this week’s article are Compania Cervecerias Unidas S.A. CCU, PVH Corp. PVH, Concrete Pumping Holdings, Inc. BBCP, Ranger Energy Services, Inc. RNGR and ePlus inc. PLUS.
5 Value Stocks with Alluring EV-to-EBITDA Ratios
The price-to-earnings (P/E) multiple enjoys wide-scale popularity among investors seeking stocks trading at a bargain. In addition to being a widely-used tool for screening stocks, P/E is a popular metric to work out the fair market value of a firm. But even this ubiquitously used valuation multiple has a few downsides.
While P/E enjoys great popularity among value investors, a less-used and more-complicated metric called EV-to-EBITDA is sometimes viewed as a better alternative. EV-to-EBITDA gives the true picture of a company’s valuation and earnings potential. It has a more comprehensive approach to valuation.
Compania Cervecerias Unidas S.A., PVH Corp., Concrete Pumping Holdings, Inc., Ranger Energy Services, Inc. and ePlus inc. are some stocks with attractive EV-to-EBITDA ratios.
EV-to-EBITDA is a Better Option, Here’s Why
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.
The other component of the multiple, EBITDA, 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.
EV-to-EBITDA takes into account the debt on a company’s balance sheet that the P/E ratio does not. Due to this reason, EV-to-EBITDA is generally used to value the potential acquisition targets as it shows the amount of debt the acquirer has to assume. Stocks boasting a low EV-to-EBITDA multiple could be seen as attractive takeover candidates.
P/E also can’t be used to value a loss-making firm. A firm’s earnings are also subject to accounting estimates and management manipulation. In contrast, EV-to-EBITDA is harder to manipulate and can be used to value companies with negative net earnings but are positive on the EBITDA front.
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.
However, EV-to-EBITDA is not devoid of shortcomings and alone can’t conclusively determine a stock’s inherent potential and future performance. The multiple varies across industries and is usually not appropriate while comparing stocks in different industries, given their diverse capital expenditure requirements.
Therefore, 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.
Here are our five picks out of the 10 stocks that passed the screen:
Compania Cervecerias Unidas is a multinational beverage company with diversified businesses and operations. This Zacks Rank #1 stock has a Value Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Compania Cervecerias Unidas has an expected year-over-year earnings growth rate of 65.7% for the current year. The Zacks Consensus Estimate for CCU’s current-year earnings has been revised 13.7% upward over the past 60 days.
PVH specializes in designing and marketing branded dress shirts, neckwear, sportswear, jeanswear, intimate apparel, swim products, footwear, handbags and related products. This Zacks Rank #2 stock has a Value Score of A.
The Zacks Consensus Estimate for PVH’s current fiscal-year earnings has been revised 0.6% upward over the past 60 days. Its earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 23.4%, on average.
Concrete Pumping Holdings is a leading provider of concrete pumping services and concrete waste management services in the United States and U.K. markets. This Zacks Rank #2 stock has a Value Score of A.
Concrete Pumping Holdings has an expected year-over-year earnings growth rate of 43.2% for the current year. The Zacks Consensus Estimate for BBCP’s current-year earnings has been revised 15.2% upward over the past 60 days.
Ranger Energy Services is a leading provider of high-specification mobile rig well services, cased hole wireline services, and ancillary services in the U.S. oil and gas industry. This Zacks Rank #2 stock has a Value Score of A.
Ranger Energy Services has an expected year-over-year earnings growth rate of 192.1% for the current year. The Zacks Consensus Estimate for RNGR’s current-year earnings has been revised 8.2% upward over the past 60 days.
ePlus inc. is a leading provider of technology solutions, enabling organizations to optimize their IT infrastructure and supply chain processes. This Zacks Rank #2 stock has a Value Score of B.
ePlus has an expected year-over-year earnings growth rate of 7.7% for the current fiscal year. The Zacks Consensus Estimate for PLUS’ current fiscal-year earnings has been revised 6.8% upward over the past 60 days.
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For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2072264/5-value-stocks-with-alluring-ev-to-ebitda-ratios-to-own-now
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PVH Corp. (PVH) : Free Stock Analysis Report
Compania Cervecerias Unidas, S.A. (CCU) : Free Stock Analysis Report
ePlus inc. (PLUS) : Free Stock Analysis Report
Ranger Energy Services, Inc. (RNGR) : Free Stock Analysis Report
CONCRETE PUMPING HOLDINGS, INC. (BBCP) : Free Stock Analysis Report
