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Zacks.com Featured Highlights Include: ArcBest, Zions, Covenant Transportation, Seaspan And Exelon

By Zacks Investment ResearchStock MarketsDec 12, 2018 03:22AM ET
www.investing.com/analysis/zackscom-featured-highlights-include-arcbest-zions-covenant-transportation-seaspan-and-exelon-200367273
Zacks.com Featured Highlights Include: ArcBest, Zions, Covenant Transportation, Seaspan And Exelon
By Zacks Investment Research   |  Dec 12, 2018 03:22AM ET
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For Immediate Release

Chicago, IL – December 12, 2018 - Stocks in this week’s article are: ArcBest Corp. (NASDAQ:ARCB) , Zions Bancorp. (NASDAQ:ZION) , Covenant Transportation Group, Inc. (NASDAQ:CVTI) , Seaspan Corp. (NYSE:SSW) and Exelon Corp. (NYSE:EXC) .

5 Value Picks with Strikingly Low EV/EBITDA Ratios

Price-to-earnings (P/E) is undoubtedly the most commonly used metric in the value investing world. This straightforward, easy-to-calculate ratio enjoys greater popularity among valuation metrics in the investment toolkit and is preferred while uncovering bargain stocks. A widely favored approach by value investors is to chase stocks with a low P/E ratio. But even this equity valuation multiple is not devoid of shortcomings.

Why EV/EBITDA is a Better Alternative?

While P/E is by far the most popular valuation metric, a more complicated metric called EV/EBITDA does a better job in working out the fair market value of 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.

Also dubbed as the 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. Essentially, it is the total value of a company.

EBITDA, the other component of the ratio, gives the true picture of a company’s profitability as it removes the impact of non-cash expenses like depreciation and amortization that depress net earnings. It is also often used as a proxy for cash flows.

Typically, the lower the EV/EBITDA ratio, the more attractive it is. A low EV/EBITDA ratio could signal that a stock is potentially undervalued and vice versa.

However, EV/EBITDA takes into account the debt on a company’s balance sheet that P/E ratio does not. Given this reason, EV/EBITDA is usually used to value possible acquisition targets, as it shows the amount of debt the acquirer has to assume. Companies with a low EV/EBITDA multiple could be seen as attractive takeover candidates.

Another downside of P/E is that it can’t be used to value a loss-making company. A company’s earnings are also subject to accounting estimates and management manipulation. EV/EBITDA, in contrast, is less amenable to manipulation and also can be used to value firms that have negative net earnings but are positive on the EBITDA side.

EV/EBITDA is also a useful tool in measuring the value of firms that are highly leveraged and have a high degree of depreciation. It also allows the comparison of companies with different debt levels.

But EV/EBITDA is not without its limitations. The ratio varies across industries (a high-growth industry typically has higher multiple and vice versa) and is usually not appropriate while comparing stocks in different industries given their diverse capital requirements.

Thus, instead of solely relying on EV/EBITDA, you can combine 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.

For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/342233/5-value-picks-with-strikingly-low-evebitda-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

Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.

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Contact: Jim Giaquinto

Company: Zacks.com

Phone: 312-265-9268

Email: pr@zacks.com

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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 http://www.zacks.com/performance for information about the performance numbers displayed in this press release.



Seaspan Corporation (SSW): Free Stock Analysis Report

ArcBest Corporation (ARCB): Free Stock Analysis Report

Covenant Transportation Group, Inc. (CVTI): Free Stock Analysis Report

Exelon Corporation (EXC): Free Stock Analysis Report

Zions Bancorporation (ZION): Free Stock Analysis Report

Original post

Zacks Investment Research
Zacks.com Featured Highlights Include: ArcBest, Zions, Covenant Transportation, Seaspan And Exelon
 
Zacks.com Featured Highlights Include: ArcBest, Zions, Covenant Transportation, Seaspan And Exelon

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