Zacks.com featured highlights include First Bank, CEMEX, Costamare, ASE Technology and Summit Hotel Properties
For Immediate Release
Chicago, IL – February 1, 2024 – Stocks in this week’s article are First Bank FRBA, CEMEX, S.A.B. de C.V. CX, Costamare Inc. CMRE, ASE Technology Holding Co., Ltd. ASX and Summit Hotel Properties, Inc. INN.
Pick These 5 Bargain Stocks with Enticing EV-to-EBITDA Ratios
Price-to-earnings (P/E), given its inherent simplicity, is the most commonly used metric in the value-investing world. It is preferred by many investors while handpicking stocks trading at a bargain. However, even this straightforward, broadly used valuation metric 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.
First Bank, CEMEX, S.A.B. de C.V., Costamare Inc., ASE Technology Holding Co., Ltd. and Summit Hotel Properties, Inc. are some stocks with impressive EV-to-EBITDA ratios.
EV-to-EBITDA is a Better Option, Here's Why
Also referred to as enterprise multiple, EV-to-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. In essence, it is the entire value of a company.
EBITDA, the other element of the ratio, gives a clearer picture of a company's profitability as it strips out non-cash expenses like depreciation and amortization that reduce net earnings. It is also often used as a proxy for cash flows.
Generally, the lower the EV-to-EBITDA ratio, the more enticing 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.
Moreover, P/E 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 that have 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 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.
As such, 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 nine stocks that passed the screen:
First Bank is a state-chartered bank that offers a traditional range of deposit and loan products to individuals and businesses. This Zacks Rank #1 stock has a Value Score of A.
First Bank has an expected year-over-year earnings growth rate of 7.9% for 2024. The Zacks Consensus Estimate for FRBA's 2024 earnings has been revised 6% upward over the last 60 days.
CEMEX is a global construction materials company. 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.
CEMEX has an expected year-over-year earnings growth rate of 39.2% for 2024. The Zacks Consensus Estimate for CX's 2024 earnings has been revised 4.4% upward over the last 60 days.
Costamare is a leading owner and provider of containerships and dry bulk vessels for charter. CMRE, a Zacks Rank #2 stock, has a Value Score of A.
Costamare has an expected year-over-year earnings growth rate of 26.1% for 2024. The consensus estimate for CMRE's 2024 earnings has been revised 1.2% upward over the past 60 days.
ASE Technology is a provider of semiconductor manufacturing services in assembly and testing. This Zacks Rank #2 stock has a Value Score of A.
ASE Technology has an expected year-over-year earnings growth rate of 58.7% for 2024. The Zacks Consensus Estimate for ASX's 2024 earnings has been revised 5.8% upward over the last 60 days.
Summit Hotel Properties is a real estate investment trust focused on owning premium-branded lodging properties with efficient operating models mainly in the upscale segment of the lodging industry. This Zacks Rank #2 stock has a Value Score of A.
Summit Hotel Properties has an expected year-over-year earnings growth rate of 1.4% for 2024. The consensus estimate for INN's 2024 earnings has been revised 16.5% 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/2218505/pick-these-5-bargain-stocks-with-enticing-ev-to-ebitda-ratios
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Cemex S.A.B. de C.V. (CX) : Free Stock Analysis Report
Summit Hotel Properties, Inc. (INN) : Free Stock Analysis Report
ASE Technology Holding Co., Ltd. (ASX) : Free Stock Analysis Report
Costamare Inc. (CMRE) : Free Stock Analysis Report
First Bank (FRBA) : Free Stock Analysis Report
