Pick These 5 Bargain Stocks With Exciting EV-to-EBITDA Ratios

Investors generally tend to cling to the price-to-earnings (P/E) metric while looking for bargain stocks. In addition to being a widely used tool for screening stocks, P/E is also a popular metric to work out the fair market value of a company. But even this ubiquitously used valuation multiple has a few downsides.

Although P/E is the most popular valuation metric, a more complicated multiple called EV-to-EBITDA works even better. Often considered a better alternative to P/E, it gives the true picture of a company’s valuation and earnings potential and has a more complete approach to valuation. While P/E considers a firm’s equity portion, EV-to-EBITDA determines its total value.

BCB Bancorp, Inc. BCBP, FirstSun Capital Bancorp FSUN, Nomad Foods Limited NOMD, Genesco Inc. GCO and ASGN Incorporated ASGN are some stocks with attractive EV-to-EBITDA ratios.

Here’s Why EV-to-EBITDA Is a Better Option

Also referred to as enterprise multiple, 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, its debt and preferred stock minus cash and cash equivalents. In essence, it is the entire value of a company. EBITDA, the other element, gives a clearer picture of a company’s profitability by removing the impact of non-cash expenses such as depreciation and amortization that dampen net earnings. It is also often used as a proxy for cash flows. 

Typically, the lower the EV-to-EBITDA ratio, the more enticing it is. A low EV-to-EBITDA ratio could indicate that a stock is undervalued. Unlike the P/E ratio, EV-to-EBITDA takes debt on a company’s balance sheet into account. For this reason, it is typically used to value acquisition targets. The ratio shows the amount of debt that the acquirer has to bear. Stocks flaunting a low EV-to-EBITDA multiple could be seen as attractive takeover candidates. 

P/E can’t be used to value a loss-making firm. A firm’s earnings are also subject to accounting estimates and management manipulation. In contrast, EV-to-EBITDA is harder to manipulate and can be used to value companies that have negative net earnings but are positive on the EBITDA front. EV-to-EBITDA is also a useful tool in measuring the value of firms that are highly leveraged and have a high degree of depreciation. It can also be used to compare companies with different levels of debt.

EV-to-EBITDA is not devoid of limitations and alone cannot conclusively determine a stock’s inherent potential and future performance. The multiple varies across industries and is usually not appropriate when comparing stocks in different industries, given their diverse capital expenditure requirements.

Thus, instead of just relying on EV-to-EBITDA, you can club it with the other major ratios, such as price-to-book (P/B), P/E and price-to-sales (P/S) to achieve the desired results.

Screening Criteria

Here are the parameters to screen for bargain stocks:

EV-to-EBITDA 12 Months-Most Recent less than X-Industry Median: A lower EV-to-EBITDA ratio represents a cheaper valuation.

P/E using (F1) less than X-Industry Median: This metric screens stocks that are trading at a discount to their peers.

P/B less than X-Industry Median: A lower P/B compared with the industry average implies that the stock is undervalued.

P/S less than X-Industry Median: The lower the P/S ratio, the more attractive the stock is, as investors will have to pay a smaller price for the same amount of sales generated by the company.

Estimated One-Year EPS Growth F(1)/F(0) greater than or equal to X-Industry Median: This parameter will help in screening stocks that have growth rates higher than the industry median. 

Average 20-day Volume greater than or equal to 50,000: The addition of this metric ensures that shares can be traded easily.

Current Price greater than or equal to $5: This parameter will help in screening stocks that are trading at a minimum price of $5 or higher.

Zacks Rank less than or equal to 2: It is a fundamental truth that stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have always managed to beat adversities and outperform the market.

Value Score of less than or equal to B: Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.

Here are our five picks out of the 12 stocks that passed the screen:

BCB Bancorp operates as the holding company for BCB Community Bank, which offers businesses and individuals a wide range of loans, deposit products, and retail and commercial banking services. This Zacks Rank #1 stock has a Value Score of A. 

BCB Bancorp has an expected earnings growth rate of 234.5% for 2026. The Zacks Consensus Estimate for BCBP’s 2026 earnings has been revised 14.1% upward over the past 60 days.

FirstSun Capital Bancorp is the financial holding company for Sunflower Bank, N.A., which operates as Sunflower Bank. This Zacks Rank #2 stock has a Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

FirstSun Capital has an expected year-over-year earnings growth rate of 13.8% for 2026. The Zacks Consensus Estimate for FSUN's 2026 earnings has been revised 9.8% upward over the past 60 days.

Nomad Foods manufactures and distributes frozen foods primarily in the United Kingdom, Italy, Germany, Sweden, France and Norway. This Zacks Rank #2 company has a Value Score of A. 

Nomad Foods has an expected year-over-year earnings growth rate of 0.5% for 2026. The Zacks Consensus Estimate for NOMD’s 2026 earnings has moved up 1.6% over the past 60 days.

Genesco is a specialty retail and branded company, which sells footwear and accessories in retail stores throughout the United States, Canada, the United Kingdom and the Republic of Ireland. This Zacks Rank #2 company has a Value Score of A. 

Genesco has an expected earnings growth rate of 43.2% for the current fiscal year. The Zacks Consensus Estimate for GCO’s current fiscal-year earnings has been revised 42.1% upward over the past 60 days.

ASGN is a leading provider of IT services and solutions across the commercial and government sectors. This Zacks Rank #2 stock has a Value Score of A. 

ASGN has an expected year-over-year earnings growth rate of 10.1% for 2026. The consensus estimate for ASGN’s 2026 earnings has moved up 1.2% over the past 60 days.

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This article originally published on Zacks Investment Research (zacks.com).

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