5 Stocks with Low EV-to-EBITDA Ratios to Consider

EV-to-EBITDA is a valuation metric that takes into account a company's total value, including debt, and earnings before interest, taxes, depreciation, and amortization (EBITDA). It is considered a better alternative to the price-to-earnings (P/E) multiple as it provides a more complete approach to valuation. Stocks with low EV-to-EBITDA ratios may be undervalued and attractive for acquisition. However, the ratio varies across industries and should be used in conjunction with other metrics for a comprehensive valuation.

Rex American Resources (REX) reported a significant increase in its fiscal Q2 revenue, driven by higher ethanol sales volumes. The company's Q2 revenue rose to $158.6 million, up from $127.5 million in the same period last year [1]. Despite lower ethanol and dried distiller grain pricing, higher sales volumes were the primary driver of this revenue increase.

However, net income per share declined to $0.43 from $0.70 in Q2 '24. The company attributed this decline to higher operational expenses and lower net income due to lower ethanol and dried distiller grain pricing [1].

REX also announced a 2-for-1 stock split, which will double the number of outstanding shares. This move aims to make the stock more accessible and attractive to investors. The stock recently traded at 35 times the next 12-month earnings, compared to a P/E of 21 three months ago [1].

Looking ahead, REX expects the completion of its ethanol expansion project in 2026 and anticipates benefits from the 45Z and 45Q tax credits in the One Big Beautiful Bill Act. The company is confident in market forces supporting the ethanol business [1].

Valuation Metrics and Industry Comparisons

To better understand REX's valuation, it is essential to consider the EV-to-EBITDA ratio. This metric provides a more complete approach to valuation by taking into account a company's total value, including debt, and earnings before interest, taxes, depreciation, and amortization (EBITDA). A lower EV-to-EBITDA ratio may indicate that a stock is undervalued and attractive for acquisition [2].

Comparing REX's EV-to-EBITDA ratio with industry peers can provide valuable insights. However, it is crucial to note that the EV-to-EBITDA ratio varies across industries. For instance, the "Signs & advertising specialty producers" industry has an EBITDA multiple of 11.94, while the "Pet & Pet Supplies Retailers" subcategory under "Miscellaneous Speciality Retailers" has a multiple of 12.58 [2].

Conclusion

REX American Resources' Q2 results highlight the company's resilience in the face of lower pricing for its core products. The stock split and anticipated tax benefits are likely to attract investor interest. However, investors should consider the EV-to-EBITDA ratio and compare it with industry peers for a comprehensive valuation.

References

[1] https://www.tradingview.com/news/reuters.com,2025:newsml_PLXEC3091:0-ethanol-maker-rex-american-resources-q2-revenue-rises-announces-2-for-1-stock-split/
[2] https://www.equidam.com/ebitda-multiples-trbc-industries/