Discover Undervalued Opportunities: 5 Stocks With Compelling EV-to-EBITDA Ratios

When screening for value stocks, most investors gravitate toward the price-to-earnings (P/E) multiple—it’s simple, intuitive, and widely available. Yet this popular metric has blind spots that can cause you to miss genuinely attractive investment opportunities. If you dig deeper into valuation analysis, you’ll discover that EV-to-EBITDA ratios often tell a more complete story about a company’s true worth and earning capacity.

Why EV-to-EBITDA Ratios Outperform Traditional P/E Analysis

Understanding the Calculation

The EV-to-EBITDA ratio divides enterprise value (EV)—which accounts for market cap, debt, preferred stock, minus cash—by earnings before interest, taxes, depreciation and amortization (EBITDA). This two-component formula strips away accounting distortions and gives you a clearer view of operational profitability. Lower ratios signal better value, just like lower P/E multiples.

Where EV-to-EBITDA Shines

The real advantage? This metric captures debt obligations that P/E completely ignores. When evaluating potential acquisition targets, debt assumption becomes critical—and EV-to-EBITDA reveals exactly that risk. It’s also the only tool that works for loss-making companies still generating positive EBITDA, and it resists accounting manipulation far better than earnings-based metrics.

For capital-intensive industries with heavy depreciation, or when comparing firms with wildly different leverage levels, EV-to-EBITDA ratios provide apples-to-apples comparisons that P/E cannot. However, remember that this ratio varies significantly across industries and sectors, so combining it with price-to-book (P/B), price-to-sales (P/S), and P/E ratios creates a more robust screening framework.

The Screening Formula for Finding Hidden Value

To identify genuinely undervalued stocks, apply these quantitative filters:

• EV-to-EBITDA (12-month trailing): Below industry median
• Forward P/E: Trading below peer average
• Price-to-Book: Discount to sector norm
• Price-to-Sales: Lower than comparable companies
• Earnings Growth Forecast: Exceeding industry median
• Trading Volume: Minimum 50,000 daily average (ensures liquidity)
• Share Price Floor: $5 or higher
• Zacks Rank: #1 (Strong Buy) or #2 (Buy) only
• Value Score: A or B grade (historically, A/B grades combined with top Zacks ranks deliver superior returns)

Five Stocks Meeting the Criteria

Plains GP Holdings (PAGP) operates crude oil and refined product transportation, storage, and marketing through its subsidiary network. This Zacks Rank #1 pick carries an A Value Score. Investors should note the 27% expected earnings growth for 2026, with consensus estimates revised upward 19.7% over the past two months—a sign of accelerating analyst confidence.

DNOW Inc. (DNOW) leads the global energy and industrial solutions distribution space. Also a Zacks Rank #1 holding with A-grade Value Score, DNOW projects 18.5% earnings expansion through 2026. Recent forecast adjustments show a 2.1% upward revision, indicating steady sector optimism.

Gibraltar Industries (ROCK) manufactures industrial and building products for diverse end markets. This Zacks Rank #2 stock earned an A Value Score. The 11% anticipated earnings growth for 2026 reflects stable operational momentum, with consensus estimates up 1.5% over the latest 60-day window.

Miller Industries (MLR) specializes in towing and recovery equipment manufacturing. Ranked #2 by Zacks with an A Value Score, this name stands out with extraordinary 139.5% projected earnings growth for 2026—a dramatic expansion supported by 19.7% upward estimate revision. This exceptional growth trajectory warrants close monitoring.

Sally Beauty Holdings (SBH) distributes professional beauty supplies globally through retail and wholesale channels. Zacks Rank #2 and Value Score A designation accompany 8.4% forecasted fiscal 2026 earnings growth, with consensus estimates climbing 2.5% recently.

The Track Record That Matters

Historical data demonstrates that disciplined, quantitative stock selection using EV-to-EBITDA ratios combined with complementary valuation metrics consistently outpaces broad market benchmarks. The methodology has delivered average annual returns exceeding 48-57% when applied through proven ranking systems, substantially surpassing the S&P’s long-term 7.7% average annual performance.