Pick These 5 Bargain Stocks With Alluring EV-to-EBITDA Ratios

Zacks.com highlights the EV-to-EBITDA ratio as a superior valuation metric to the P/E ratio, as it accounts for debt and can be used to value loss-making firms. Using a screen based on low EV-to-EBITDA ratios and other value factors, Zacks identifies five stocks: Nomad Foods (NOMD), Koninklijke Ahold Delhaize N.V. (ADRNY), Upbound Group, Inc. (UPBD), Easterly Government Properties, Inc. (DEA) and The Gorman-Rupp Company (GRC); all are rated Zacks Rank #1 or #2 with positive earnings growth expectations for 2025.

Analysis

The report advocates for the Enterprise Value to EBITDA (EV-to-EBITDA) ratio as a more comprehensive valuation metric than the traditional Price-to-Earnings (P/E) ratio, emphasizing its utility in assessing a company's total value including debt, its applicability to firms with negative net earnings but positive EBITDA, and its relevance in identifying potential acquisition targets. A specific screening methodology, prioritizing low EV-to-EBITDA relative to industry medians alongside favorable P/E, Price-to-Book, and Price-to-Sales ratios, above-median EPS growth, sufficient trading volume, a minimum share price of $5, a Zacks Rank of #1 (Strong Buy) or #2 (Buy), and a Value Score of A or B, yielded five highlighted companies. These are Nomad Foods (NOMD), Koninklijke Ahold Delhaize N.V. (ADRNY), Upbound Group, Inc. (UPBD), Easterly Government Properties, Inc. (DEA), and The Gorman-Rupp Company (GRC). Nomad Foods (NOMD), a Zacks Rank #1 company with a Value Score of A, shows an expected 2025 earnings growth of 7.3% and a 4% upward revision in its 2025 consensus earnings over the past 60 days. Ahold Delhaize (ADRNY), Upbound Group (UPBD), Easterly Government Properties (DEA), and Gorman-Rupp (GRC) are all Zacks Rank #2 companies. ADRNY (Value Score A) has an expected 2025 earnings growth of 6.6% with a 3.2% upward earnings revision. UPBD (Value Score A) projects 8.6% earnings growth for 2025, with a 1.5% upward revision. DEA (Value Score B) anticipates 2.4% earnings growth in 2025, alongside a 0.3% upward revision. GRC (Value Score B) has the highest expected 2025 earnings growth among the group at 13.7%, with a 0.5% upward revision. The overall sentiment indicated by associated signals is 'strongly positive' (score 0.75) with a 'bullish' tone, aligning with the article's presentation of these screened stocks as undervalued opportunities. Per-ticker sentiment scores reinforce this, with NOMD and GRC at 0.8, ADRNY and UPBD at 0.75, and DEA at 0.6.

Key Decisions for Investors

• Investors seeking value opportunities should consider the five highlighted stocks—NOMD, ADRNY, UPBD, DEA, and GRC—which display attractive EV-to-EBITDA ratios, positive 2025 earnings growth outlooks ranging from 2.4% to 13.7%, and recent upward revisions in consensus earnings estimates.
• It is advisable to incorporate the EV-to-EBITDA metric into valuation processes, particularly for companies with significant debt or when evaluating potential takeover candidates, while acknowledging that its interpretation is industry-specific and it should be used in conjunction with other financial ratios.
• Given the strong Zacks Ranks (#1 or #2) and favorable Value Scores (A or B) of the identified companies, these stocks warrant further due diligence to assess their fit within diversified investment portfolios, aligning with the article's suggestion of their potential as bargain investments.