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Fred's has the Lowest EV/EBITDA Ratio in the General Merchandise Stores Industry (FRED, BIG, TGT)

Published on Fri, 01/18/2013 - 11:21
By Peter Chu

Below are the three companies in the General Merchandise Stores industry with the lowest enterprise value to EBITDA (EV/EBITDA) ratios. EV/EBITDA is an important metric used in valuing comparable companies. It is capital structure neutral and generally the lower the ratio, the more undervalued the company is believed to be.

Fred's (NASDAQ:FRED) is lowest with an EV/EBITDA ratio of 5.37. Fred's, Inc. operates discount general merchandise stores in the southeastern United States. The Company also markets goods and services through Fred's Super Dollar Stores and Pharmacies and Fred's Xpress Pharmacies. Fred's has traded 45,000 shares thus far today, vs. average volume of 228,000 shares per day. The stock has underperformed the Dow (-0.3% to the Dow's -0.0%) and underperformed the S&P 500 (-0.3% to the S&P's -0.2%) during today's trading.

Big Lots (NYSE:BIG) is next with an EV/EBITDA ratio of 5.54.

Finishing up the bottom three is Target (NYSE:TGT), with an EV/EBITDA ratio of 7.70.

By Peter Chu