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Zacks.com featured highlights Greif, UFP Industries, SpartanNash, United Microelectronics and AXIS Capital

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·8-min read
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For Immediate Release

Chicago, IL – June 22, 2022 – Stocks in this week’s article are Greif, Inc. GEF, UFP Industries, Inc. UFPI, SpartanNash Co. SPTN, United Microelectronics Corp. UMC and AXIS Capital Holdings Ltd. AXS.

Pick These 5 Bargain 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 also a popular metric to work out the fair market value of a firm. However, even this ubiquitously used valuation multiple has a few downsides.

Although P/E is the most popular valuation metric, a more complicated multiple called EV-to-EBITDA works even better. Often considered a better alternative to P/E, it gives the true picture of a company's valuation and earnings potential, and has a more complete approach to valuation. While P/E considers a firm's equity portion, EV-to-EBITDA determines its total value.

Greif, Inc., UFP Industries, Inc., SpartanNash Co., United Microelectronics Corp. and AXIS Capital Holdings Ltd. are some stocks with attractive EV-to-EBITDA ratios.

What Makes EV-to-EBITDA a Better Alternative?

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.

Usually, 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.

However, unlike P/E ratio, EV-to-EBITDA takes into account the debt on a company's balance sheet. Given this reason, EV-to-EBITDA is usually used to value the possible acquisition targets. Stocks with a low EV-to-EBITDA multiple could be seen as potential 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 also 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 for evaluating 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.

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.

Here are our five picks out of the 19 stocks that passed the screen:

Greif is a leading global producer of industrial packaging products and services. This Zacks Rank #1 stock has a Value Score of A.

Greif has an expected year-over-year earnings growth rate of 36.3% for the current fiscal year. The Zacks Consensus Estimate for GEF's current fiscal-year earnings has been revised 17.4% upward over the past 60 days.

UFP Industries supplies wood, wood composite and other products in retail, industrial, and construction markets. This Zacks Rank #1 stock has a Value Score of A. You can see the complete list of today's Zacks #1 Rank stocks here.

UFP Industries has an expected earnings growth rate of 11.8% for the current year. The Zacks Consensus Estimate for UFPI's current-year earnings has been revised 16.1% upward over the past 60 days.

SpartanNash distributes grocery products to a diverse group of independent and chain retailers, its corporate-owned retail stores, and U.S. military commissaries and exchanges. This Zacks Rank #1 stock has a Value Score of A.

SpartanNash has an expected earnings growth rate of 32.9% for the current year. The Zacks Consensus Estimate for SPTN's current-year earnings has been revised 6.6% upward over the past 60 days.

United Microelectronics is a leading semiconductor foundry company, providing high-quality integrated circuit production with a focus on logic and specialty technologies to cater to every major sector of the electronics industry. This Zacks Rank #2 stock has a Value Score of A.

United Microelectronics has an expected earnings growth rate of 51.8% for the current year. The Zacks Consensus Estimate for UMC's current-year earnings has been revised 12.5% upward over the past 60 days.

AXIS Capital Holdings provides a broad range of specialty insurance and reinsurance solutions to its clients globally. This Zacks Rank #2 stock has a Value Score of A.

AXIS Capital Holdings has an expected earnings growth rate of 23.6% for the current year. The Zacks Consensus Estimate for AXS's current-year earnings has been revised 18.3% upward over the past 60 days.

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.

For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1941504/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

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