Zacks.com strengths include: TravelCenters of America, Academy Sports and Outdoors, ASE Tech, Universal Insurance and Covenant Logistics

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Chicago, IL – November 11, 2021 – The actions in this week’s article are TravelCenters of America Inc. TA, Academy Sports and Outdoors, Inc. ASO, ASE Technology Holding Co., Ltd. ASX, Universal Insurance Holdings, Inc. UVE and Covenant Logistics Group, Inc. CVLG.

Exploit these 5 advantageous stocks with attractive EV / EBITDA ratios

Price / Earnings (P / E) multiple is popular among investors looking for cheap stocks. Besides being a widely used tool for filtering stocks, the P / E is also a popular measure for determining the fair market value of a business. However, even this ubiquitous valuation multiple has some drawbacks.

EV-EBITDA a better option, here’s why

While P / E is the most popular valuation metric, a more complicated multiple called EV-to-EBITDA works even better. Often viewed as a better alternative to P / E, it gives a true picture of a company’s valuation and earning potential, and has a more comprehensive approach to valuation. While the P / E takes into account a company’s share of equity, the EV / EBITDA ratio determines its total value.

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, debt, and preferred shares less cash and cash equivalents. In essence, that’s the whole value of a business.

EBITDA, the other component of the ratio, gives a clearer picture of a company’s profitability because it eliminates non-cash expenses like depreciation and amortization that reduce the bottom line. It is also often used as an indicator of cash flow.

Just like the P / E, the lower the EV / EBITDA ratio, the more attractive it is. A low EV / EBITDA ratio could indicate that a stock is potentially undervalued.

EV / EBITDA takes into account a company’s balance sheet debt that the P / E ratio does not take into account. For this reason, the EV / EBITDA ratio is typically used to assess potential acquisition targets, as it indicates the amount of debt that the acquirer has to assume. Equities with a low EV / EBITDA multiple could be seen as attractive candidates for a takeover.

Another downside of P / E is that it cannot be used to value a loss making business. A company’s profits are also subject to accounting estimates and management manipulation. On the other hand, the EV / EBITDA ratio is difficult to manipulate and can also be used to assess companies in loss but with positive EBITDA.

The EV / EBITDA ratio is also a useful yardstick for measuring the value of heavily indebted and heavily impaired companies. Additionally, it can be used to compare companies with different levels of debt.

However, the EV / EBITDA ratio is not without limitations and cannot on its own conclusively determine the inherent potential and future performance of a stock. The multiple varies across industries and is generally not appropriate when comparing stocks of different industries given their varying capital expenditure requirements.

As such, a strategy based solely on the EV / EBITDA ratio might not yield the desired results. But you can combine it with other major ratios in your stock investing toolkit like price / book (P / B), price / earnings, and price / sell (P / S) to filter the good deals.

For the rest of this article on the screen of the week, please visit Zacks.com at: https://www.zacks.com/stock/news/1826428/tap-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 securities short and / or hold long and / or short positions in options mentioned in this document. An affiliated investment advisory firm may own or have sold securities short and / or hold long and / or short positions in options mentioned in this document.

About the screen of the week

Zacks.com created the first and best filtering system on the web, earning it the “# 1 Stock Filtering Site” award by Money Magazine. But powerful screening tools are just the start. That’s why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.

Solid stocks that should make the news

Many are poorly publicized and fall under the radar of Wall Street. They are practically unknown to the general public. Yet the 220 “strong buys” in today’s Zacks rankings were generated by the stock picking system which more than doubled the market from 1988 to 2016. Its average gain was + 25% per year. See these high potential actions for free >>.

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Contact: Jim Giaquinto

Company: Zacks.com

Telephone: 312-265-9268

Email: [email protected]

Visit: www.Zacks.com

Zacks.com provides investment resources and informs you of these resources, which you can choose to use in making your own investment decisions. Zacks provides information on this resource to you subject to Zacks’ “Terms and Conditions of Service” disclaimer. www.zacks.com/disclaimer.

Past performance is no guarantee of future results. The potential for loss is inherent in any investment. This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold any security. No recommendation or advice is given as to whether an investment is suitable for a particular investor. It should not be assumed that any investment in any identified and described securities, companies, sectors or markets was or will be profitable. All information is current as of the date hereof and is subject to change without notice. The views or opinions expressed may not reflect those of the company as a whole. Zacks Investment Research does not engage in investment banking, market making or securities asset management activities. These returns come from hypothetical portfolios composed of stocks with a Zacks rank = 1 that have been rebalanced monthly without any transaction costs. These are not the returns of actual equity portfolios. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for more information on the performance figures displayed in this press release.

Boom in infrastructure stocks will sweep America

A massive push to rebuild crumbling American infrastructure will soon be underway. It is bipartisan, urgent and inevitable. Billions will be spent. Fortunes will be made.

The only question is, “Are you going to jump into good stocks early when they have the greatest potential for growth?” “

Zacks published a special report to help you do just that, and today it’s free. Discover 7 special companies looking to make the most of the construction and repair of roads, bridges and buildings, as well as transporting goods and transforming energy on an almost unimaginable scale.

Download FREE: How to Profit from Billions of Dollars in Infrastructure Spending >>

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TravelCenters of America LLC (TA): Free Stock Analysis Report

ASE Technology Holding Co., Ltd. (ASX): Free Stock Analysis Report

UNIVERSAL INSURANCE HOLDINGS INC (UVE): Free Stock Analysis Report

Covenant Logistics Group, Inc. (CVLG): Free Inventory Analysis Report

Academy Sports and Outdoors, Inc. (ASO): Free Stock Analysis Report

To read this article on Zacks.com, click here.

Zacks investment research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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