5 Value Stocks With Exciting EV-to-EBITDA Ratios to Own Now

The article advocates for Enterprise Value-to-EBITDA (EV-to-EBITDA) as a superior valuation metric to the traditional Price-to-Earnings (P/E) ratio, particularly for identifying undervalued stocks and potential acquisition targets. EV-to-EBITDA offers a more complete picture by incorporating a company's debt, unlike P/E, and is applicable even to loss-making but EBITDA-positive firms, while being less susceptible to manipulation. While acknowledging its limitations across diverse industries, the analysis suggests combining it with other metrics like P/E, P/B, and P/S for robust screening. Applying this methodology, the article identifies five value stocks with attractive EV-to-EBITDA ratios: Post Holdings (POST), Plains GP Holdings (PAGP), The Greenbrier Companies (GBX), POSCO Holdings Inc. (PKX), and Sally Beauty Holdings (SBH), all of which also meet specific growth, liquidity, and Zacks Rank criteria.

Analysis

The analysis proposes that the Enterprise Value-to-EBITDA (EV-to-EBITDA) ratio is a more comprehensive valuation tool than the standard Price-to-Earnings (P/E) multiple, primarily because it incorporates a company's total debt and is less susceptible to accounting manipulations. The article outlines a quantitative screening strategy designed to identify undervalued stocks by combining a low EV-to-EBITDA ratio (relative to industry peers) with other value indicators like low P/E, P/B, and P/S ratios. This value-centric approach is further filtered by criteria for positive growth (EPS growth exceeding the industry median) and strong analyst sentiment (a high Zacks Rank). A key insight presented is that companies with low EV-to-EBITDA can be viewed as potential M&A targets. The screen identified five specific companies: Post Holdings (POST), Plains GP Holdings (PAGP), The Greenbrier Companies (GBX), POSCO Holdings (PKX), and Sally Beauty Holdings (SBH). These firms are highlighted not only for their valuation but also for their significant forward growth prospects and recent positive earnings estimate revisions. Notably, PAGP has a projected 2025 earnings growth rate of 215.4% with a 22.4% upward estimate revision in the past 60 days, while GBX and PKX also show strong outlooks with expected 2025 earnings growth of 33.1% and 88.6%, respectively.

Key Decisions for Investors

• Investors seeking value opportunities should consider the five screened stocks—POST, PAGP, GBX, PKX, and SBH—which combine attractive valuation metrics with strong forward earnings growth forecasts.
• The low EV-to-EBITDA multiples of these firms suggest they could be viewed as potential acquisition candidates, offering a potential catalyst for shareholder value beyond operational execution.
• Monitor the consensus earnings estimates for these companies closely, as the investment thesis is heavily dependent on achieving the high projected growth rates, such as the 215.4% expected for PAGP and 88.6% for PKX in 2025.
• While the quantitative screen is compelling, investors should perform their own fundamental due diligence, recognizing that valuation metrics like EV-to-EBITDA have limitations and can vary in relevance across different industries.