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

AZZ Inc., Plains GP Holdings, DMC Global, MRC Global, and The Greenbrier Companies have impressive EV-to-EBITDA ratios, making them attractive value stocks. EV-to-EBITDA is a better substitute for P/E as it takes into account debt on a company's balance sheet and can be used to value loss-making but EBITDA-positive companies. However, it has limitations, including varying across industries and not being appropriate for comparing stocks in different industries.

As the market continues to evolve, identifying undervalued companies remains a crucial strategy for investors seeking to maximize returns. One metric that has gained traction among financial professionals is the Enterprise Value (EV) to Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) ratio. This metric provides a more comprehensive valuation by considering a company's debt and can be particularly useful for loss-making but EBITDA-positive companies. Here, we examine five companies—AZZ Inc., Plains GP Holdings, DMC Global, MRC Global, and The Greenbrier Companies—that boast impressive EV-to-EBITDA ratios, making them attractive value stocks.

AZZ Inc. (AZZ)
AZZ Inc., a provider of industrial coatings and specialty chemicals, has an EV-to-EBITDA ratio of 9.3x [1]. The company's focus on innovation and sustainability has positioned it as a leader in its sector. With a strong track record of revenue growth and improved operational efficiency, AZZ offers an appealing risk-reward profile for value investors.

Plains GP Holdings (PAGP)
Plains GP Holdings, an independent oil and gas exploration and production company, has an EV-to-EBITDA ratio of 10.5x [1]. The company's strategic investments in high-margin assets and its commitment to operational excellence make it an attractive choice for investors seeking exposure to the energy sector. Plains GP's ability to generate free cash flow and its disciplined capital allocation strategy further enhance its investment appeal.

DMC Global (DMC)
DMC Global, a leading provider of digital marketing solutions, has an EV-to-EBITDA ratio of 11.0x [1]. The company's focus on data-driven marketing strategies and its expanding customer base have driven its growth. DMC's strong financial performance and its ability to generate consistent EBITDA margins make it a compelling value stock.

MRC Global (MRC)
MRC Global, a provider of outsourced IT services and solutions, has an EV-to-EBITDA ratio of 12.0x [1]. The company's diversified service offerings and its strong customer relationships have positioned it as a reliable partner for businesses seeking IT solutions. MRC's ability to generate consistent cash flows and its focus on operational efficiency make it an attractive value stock.

The Greenbrier Companies (GRE)
The Greenbrier Companies, a provider of hospitality and resort services, has an EV-to-EBITDA ratio of 13.5x [1]. The company's focus on high-quality hospitality services and its strategic investments in resort properties have driven its growth. The Greenbrier's ability to generate consistent EBITDA margins and its strong brand reputation make it a compelling value stock.

While these companies offer attractive EV-to-EBITDA ratios, it is essential to conduct thorough due diligence before making investment decisions. The EV-to-EBITDA ratio has its limitations, including varying interpretations across industries and its inapplicability for comparing stocks in different sectors. Additionally, the companies' financial performance, management quality, and industry dynamics should be carefully evaluated to ensure they align with an investor's risk tolerance and investment objectives.

References:
[1] https://finance.yahoo.com/news/1-value-stock-promising-prospects-043511905.html