Yahoo Finance Zacks.com featured highlights Navios Maritime Partners, Costamare, ODP, ADT and Portland General Electric
For Immediate Release
Chicago, IL – June 26, 2024 – Stocks in this week’s article are Navios Maritime Partners L.P. NMM, Costamare Inc. CMRE, The ODP Corp. ODP, ADT Inc. ADT and Portland General Electric Co. POR.
5 Value Stocks with Exciting EV-to-EBITDA Ratios to Snap Up
Investors generally tend to cling to the price-to-earnings (P/E) metric while looking for bargain stocks. In addition to being a widely used tool for screening stocks, P/E is also a popular metric to work out the fair market value of a company. But even this ubiquitously used valuation multiple has a few limitations.
Although P/E is by far the most popular equity valuation ratio, a more complicated metric called EV/EBITDA does a better job of valuing a firm. Often viewed as a better substitute to P/E, this ratio offers a clearer picture of a company’s valuation and its earnings potential.
Navios Maritime Partners L.P., Costamare Inc., The ODP Corp., ADT Inc. and Portland General Electric Co. are some stocks with impressive EV-to-EBITDA ratios.
Is EV-to-EBITDA a Better Substitute to P/E?
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.
EBITDA, the other component of the multiple, 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.
Just like P/E, the lower the EV-to-EBITDA ratio, the more attractive it is. A low EV-to-EBITDA ratio could signal 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.
Another shortcoming of P/E is that it can’t be used to value a loss-making firm. 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 loss-making but EBITDA-positive companies.
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 cannot 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.
A strategy solely based on EV-to-EBITDA might not yield the desired results. However, you can club it with the other major ratios in your stock-investing toolbox, such as price-to-book (P/B), P/E and price-to-sales (P/S) to screen value stocks.
Here are our five picks out of the 10 stocks that passed the screen:
Navios Maritime Partners is an international owner and operator of dry cargo vessels. This Zacks Rank #1 stock has a Value Score of A.
Navios Maritime Partners has an expected earnings growth rate of 22.1% for 2024. The Zacks Consensus Estimate for NMM’s 2024 earnings has been revised 5.3% upward over the past 60 days.
Costamare is a leading owner and provider of containerships and dry bulk vessels for charter. CMRE, a Zacks Rank #1 stock, has a Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Costamare has an expected year-over-year earnings growth rate of 48.8% for 2024. The consensus estimate for CMRE’s 2024 earnings has been revised 12% upward over the past 60 days.
ODP is one of the leading providers of business services and supplies, products and technology solutions to small, medium and enterprise businesses. This Zacks Rank #1 stock has a Value Score of A.
ODP has an expected year-over-year earnings growth rate of 7.7% for 2024. The Zacks Consensus Estimate for the company’s 2024 earnings has been revised 5.6% upward over the past 60 days.
ADT provides security and automation solutions for homes and businesses, primarily in the United States and Canada. This Zacks Rank #2 stock has a Value Score of A.
ADT has an expected year-over-year earnings growth rate of 37.3% for 2024. The Zacks Consensus Estimate for ADT’s 2024 earnings has been stable over the last 60 days.
Portland General Electric is a vertically integrated electric utility that is engaged in the generation, wholesale purchase and sale, transmission, distribution and retail sale of electricity to customers in Oregon. This Zacks Rank #2 stock has a Value Score of B.
Portland General Electric has an expected earnings growth rate of 29.8% for 2024. The Zacks Consensus Estimate for POR’s 2024 earnings has been revised 0.7% upward over the past 60 days.
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The ODP Corporation (ODP) : Free Stock Analysis Report
Portland General Electric Company (POR) : Free Stock Analysis Report
ADT Inc. (ADT) : Free Stock Analysis Report
Costamare Inc. (CMRE) : Free Stock Analysis Report
Navios Maritime Partners LP (NMM) : Free Stock Analysis Report
