Pick These 5 Bargain Stocks With Alluring 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…

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.

Cenovus Energy Inc. CVE, Five9, Inc. FIVN, PagSeguro Digital Ltd. PAGS, Ero Copper Corp. ERO and Par Pacific Holdings, Inc. PARR are some stocks with attractive EV-to-EBITDA ratios.

Why EV-to-EBITDA Is a Better Alternative?

Also dubbed as the 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.

Another shortcoming of P/E is that it can’t be used to value a loss-making firm. A company’s earnings are also subject to accounting estimates and management manipulation. On the other hand, EV-to-EBITDA is difficult to manipulate and can also be used to value loss-making but EBITDA-positive companies. 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. Moreover, it can 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 100,000: 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 19 stocks that passed the screen:

Cenovus Energy is a leading integrated energy firm with operations comprising marketing the produced oil, natural gas and natural gas liquids. This Zacks Rank #1 stock has a Value Score of A.

Cenovus Energy has an expected year-over-year earnings growth rate of 104.6% for 2026. The Zacks Consensus Estimate for CVE’s 2026 earnings has been revised 83.1% upward over the past 60 days.

Five9 provides cloud software for contact centers across the globe for enterprises, including leading health systems and financial institutions. This Zacks Rank #1 stock has a Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

Five9 has an expected earnings growth rate of 10.1% for 2026. FIVN’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, with the average surprise being 8.8%.

PagSeguro Digital is one of the largest digital banks in Brazil, promoting innovative solutions in financial services and payment methods. This Zacks Rank #2 company has a Value Score of A.

PagSeguro Digital has an expected year-over-year earnings growth rate of 19.7% for 2026. The Zacks Consensus Estimate for PAGS’ 2026 earnings has moved up 2.4% over the past 60 days.

Ero Copper is a Brazil-focused mining company with a diversified portfolio of copper and gold assets. This Zacks Rank #2 company has a Value Score of A.

Ero Copper has an expected year-over-year earnings growth rate of 93.9% for 2026. The consensus estimate for ERO's 2026 earnings has been revised 7.3% upward over the past 60 days.

Par Pacific Holdings is a growth-oriented energy company supplying conventional and renewable fuels across the western United States. This Zacks Rank #2 company has a Value Score of A.

Par Pacific Holdings has an expected year-over-year earnings growth rate of 106.4% for 2026. The Zacks Consensus Estimate for PARR’s 2026 earnings has moved up 9.9% over the past 60 days.

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