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Value by Industry -- how do your favorite sectors stack up?

Today I ran a stock screen that looked at the ratio of "Enterprise Value" to "Earnings before Income Taxes, Depreciation and Amortization". This is known more simply as EV-to-EBITDA or the "enterprise multiple" and it is often used a measure of whether a stock is over-valued or not. The enterprise multiple looks at a firm as a potential acquirer would, because it takes debt into account - an item which other multiples like the P/E ratio do not include. The lower the enterprise multiple, the greater the potential that the company is under-valued.

For this screen I took the average value of EV-to-EBITDA across each industry and created the following chart. Within the 10 standard sectors we have a total of 201 industries represented.

Sector Industry Average EV-to-EBITDA
Capital Goods Building Materials 107.5
Capital Goods Building Products 95.7
Capital Goods Homebuilding 46.6
Consumer Non-Durables Farming/Seeds/Milling 39.9
Technology Computer Communications Equipment 37.7
Technology Semiconductors 36.5
Capital Goods Biotechnology: Laboratory Analytical Instruments 34.6
Consumer Services Consumer Specialties 32.4
Health Care Ophthalmic Goods 31.3
Consumer Non-Durables Environmental Services 30.6
Finance Real Estate 29.3
Capital Goods Electrical Products 28.5
Health Care Biotechnology: Biological Products (No Diagnostic Substances) 28.2
Consumer Services Hotels/Resorts 27.8
Consumer Services Building operators 27.5
Technology Industrial Machinery/Components 27.3
Technology Computer Software: Prepackaged Software 27.1
Energy Industrial Machinery/Components 27.0
Energy Oilfield Services/Equipment 25.0
Finance Investment Managers 24.8
Basic Industries Forest Products 23.6
Consumer Durables Diversified Electronic Products 23.1
Finance Finance/Investors Services 21.0
Consumer Services Television Services 21.0
Energy Oil & Gas Production 20.9
Consumer Services Advertising 20.8
Technology Radio And Television Broadcasting And Communications Equipment 20.7
Health Care Medical/Dental Instruments 20.3
Basic Industries Precious Metals 20.1
Consumer Non-Durables Motor Vehicles 19.3
Basic Industries Steel/Iron Ore 18.5
Energy Integrated oil Companies 17.7
Capital Goods Construction/Ag Equipment/Trucks 17.2
Technology Professional Services 17.1
Consumer Services Real Estate Investment Trusts 16.6
Technology EDP Services 16.5
Consumer Non-Durables Consumer Specialties 16.4
Health Care Biotechnology: In Vitro & In Vivo Diagnostic Substances 16.3
Capital Goods Ordnance And Accessories 16.2
Transportation Oil Refining/Marketing 16.1
Miscellaneous Business Services 16.0
Capital Goods Pollution Control Equipment 15.8
Technology Diversified Commercial Services 15.8
Technology Advertising 15.6
Technology Electronic Components 15.4
Consumer Services Catalog/Specialty Distribution 15.4
Miscellaneous Multi-Sector Companies 15.3
Technology Computer peripheral equipment 15.1
Basic Industries Major Chemicals 15.0
Consumer Services Real Estate 14.9
Consumer Services Movies/Entertainment 14.8
Capital Goods Railroads 14.6
Consumer Durables Home Furnishings 14.5
Capital Goods Metal Fabrications 14.4
Technology Computer Software: Programming, Data Processing 14.4
Consumer Durables Major Pharmaceuticals 14.0
Finance Diversified Commercial Services 13.9
Capital Goods Industrial Machinery/Components 13.7
Energy Consumer Electronics/Appliances 13.7
Consumer Non-Durables Recreational Products/Toys 13.6
Health Care Biotechnology: Electromedical & Electrotherapeutic Apparatus 13.3
Public Utilities Natural Gas Distribution 13.2
Technology Computer Manufacturing 13.2
Basic Industries Aluminum 12.8
Consumer Services Home Furnishings 12.8
Consumer Non-Durables Consumer Electronics/Appliances 12.7
Basic Industries Engineering & Construction 12.6
Consumer Non-Durables Packaged Foods 12.5
Energy Natural Gas Distribution 12.3
Capital Goods Auto Manufacturing 12.2
Transportation Railroads 12.0
Consumer Services Broadcasting 11.8
Consumer Services Diversified Commercial Services 11.8
Consumer Services Transportation Services 11.8
Consumer Services Consumer Electronics/Video Chains 11.7
Technology Retail: Computer Software & Peripheral Equipment 11.7
Miscellaneous Office Equipment/Supplies/Services 11.7
Consumer Services Other Consumer Services 11.6
Consumer Non-Durables Beverages (Production/Distribution) 11.6
Consumer Durables Publishing 11.4
Consumer Durables Industrial Specialties 11.4
Capital Goods Steel/Iron Ore 11.4
Basic Industries Metal Fabrications 11.4
Consumer Services Military/Government/Technical 11.3
Consumer Durables Telecommunications Equipment 11.3
Finance Finance: Consumer Services 11.3
Consumer Durables Specialty Chemicals 11.3
Consumer Non-Durables Meat/Poultry/Fish 11.2
Consumer Services Marine Transportation 11.0
Energy Metal Fabrications 10.9
Basic Industries Mining & Quarrying of Nonmetallic Minerals (No Fuels) 10.9
Consumer Durables Metal Fabrications 10.9
Consumer Durables Consumer Electronics/Appliances 10.9
Health Care Industrial Specialties 10.9
Health Care Medical Specialities 10.8
Miscellaneous Other Consumer Services 10.7
Consumer Services RETAIL: Building Materials 10.6
Consumer Services Paper 10.6
Miscellaneous Industrial Machinery/Components 10.6
Consumer Non-Durables Homebuilding 10.6
Basic Industries Miscellaneous 10.5
Public Utilities Water Supply 10.4
Capital Goods Tools/Hardware 10.4
Consumer Services Rental/Leasing Companies 10.4
Basic Industries Agricultural Chemicals 10.3
Capital Goods Electronic Components 10.3
Consumer Non-Durables Telecommunications Equipment 10.3
Consumer Durables Miscellaneous manufacturing industries 10.2
Health Care Precision Instruments 10.2
Consumer Durables Industrial Machinery/Components 10.1
Miscellaneous Home Furnishings 10.1
Consumer Services Automotive Aftermarket 10.1
Consumer Services Professional Services 10.1
Energy Electric Utilities: Central 10.0
Consumer Services Recreational Products/Toys 10.0
Capital Goods Aerospace 10.0
Health Care Hospital/Nursing Management 9.9
Consumer Non-Durables Food Chains 9.8
Consumer Services Services-Misc. Amusement & Recreation 9.7
Health Care Medical/Nursing Services 9.7
Consumer Durables Office Equipment/Supplies/Services 9.7
Transportation Air Freight/Delivery Services 9.7
Transportation Marine Transportation 9.7
Capital Goods Industrial Specialties 9.6
Consumer Non-Durables Electronic Components 9.6
Consumer Non-Durables Specialty Foods 9.6
Basic Industries Specialty Chemicals 9.6
Transportation Aerospace 9.6
Capital Goods Auto Parts:O.E.M. 9.5
Capital Goods Medical Specialities 9.5
Consumer Services Telecommunications Equipment 9.5
Capital Goods Specialty Chemicals 9.5
Consumer Non-Durables Apparel 9.5
Consumer Services Clothing/Shoe/Accessory Stores 9.5
Basic Industries Homebuilding 9.4
Basic Industries Telecommunications Equipment 9.4
Energy Oil Refining/Marketing 9.4
Capital Goods Automotive Aftermarket 9.4
Consumer Durables Automotive Aftermarket 9.3
Finance Finance Companies 9.2
Consumer Services Motor Vehicles 9.1
Consumer Non-Durables Package Goods/Cosmetics 9.1
Consumer Durables Building Products 9.1
Capital Goods Fluid Controls 9.1
Health Care Biotechnology: Commercial Physical & Biological Resarch 9.1
Basic Industries Environmental Services 9.0
Transportation Trucking Freight/Courier Services 8.9
Basic Industries Package Goods/Cosmetics 8.9
Consumer Services Other Specialty Stores 8.9
Miscellaneous Publishing 8.9
Consumer Non-Durables Shoe Manufacturing 8.9
Consumer Services Newspapers/Magazines 8.6
Capital Goods Containers/Packaging 8.6
Consumer Services Publishing 8.5
Public Utilities Oil/Gas Transmission 8.5
Health Care Other Pharmaceuticals 8.5
Public Utilities Environmental Services 8.4
Basic Industries Electric Utilities: Central 8.3
Consumer Durables Containers/Packaging 8.2
Finance Investment Bankers/Brokers/Service 8.2
Public Utilities Oil & Gas Production 8.2
Public Utilities Power Generation 8.2
Energy Coal Mining 8.1
Public Utilities Electric Utilities: Central 8.1
Health Care Medical Electronics 8.1
Technology Electrical Products 7.9
Consumer Non-Durables Plastic Products 7.8
Consumer Non-Durables Textiles 7.8
Finance Business Services 7.8
Basic Industries Paints/Coatings 7.7
Finance Life Insurance 7.6
Public Utilities Telecommunications Equipment 7.6
Consumer Services Restaurants 7.5
Transportation Other Transportation 7.5
Consumer Durables Steel/Iron Ore 7.5
Basic Industries Paper 7.5
Capital Goods Engineering & Construction 7.5
Capital Goods Military/Government/Technical 7.4
Basic Industries Home Furnishings 7.4
Consumer Services Farming/Seeds/Milling 7.2
Transportation Transportation Services 7.2
Finance Specialty Insurers 7.2
Consumer Durables Consumer Specialties 7.2
Consumer Services Office Equipment/Supplies/Services 7.0
Consumer Services Department/Specialty Retail Stores 6.9
Consumer Non-Durables Food Distributors 6.9
Consumer Services Books 6.8
Consumer Services Food Chains 6.4
Basic Industries Military/Government/Technical 6.4
Finance Property-Casualty Insurers 6.2
Basic Industries Textiles 6.0
Consumer Durables Electrical Products 5.9
Basic Industries Containers/Packaging 5.8
Finance Accident &Health Insurance 5.6
Capital Goods Marine Transportation 5.5
Technology Telecommunications Equipment 5.5
Consumer Durables Paper 5.3
Consumer Services Consumer: Greeting Cards 4.8
Consumer Services Homebuilding 4.1
Consumer Services Electronics Distribution 3.7
Basic Industries General Bldg Contractors - Nonresidential Bldgs 3.6

One interesting thing that jumps out at me is how the General Bldg Contractors - Nonresidential Bldgs industry is at the bottom of the list where the deepest value industries are found. But at the top of the list, where the most over-valued industries are, we see Building Materials and Building Products. It seems odd that the these industries would be at the opposite end of the spectrum. And then there's Homebuilding. With it's position way at the over-valued end of the list, it seems like residential construction is garnering much more investor enthusiasm than it deserves while commercial real estate is perhaps getting much less than it deserves. Indeed, REITs are less over-valued that those companies in the Real Estate industry. In any case, there seem to be some imbalances in investor perception in these industries.

Another over-valued industry is Semiconductors. As this is one of my favorite areas for investment, this gives me pause. On the other hand, semis are generally perceived to be growth stocks so I would expect them to score poorly on a screen like this but not as poorly as they are doing here.

So if you are a value investor, this list could give you a good jumping off point for focusing on attractive industries and avoiding over-valued industries.

Note: If you are interested in which companies are in which industry, here is a link to the NASDAQ web site that will allow you to download lists of companies on the NYSE, the NASDAQ and the AMEX: http://www.nasdaq.com/screening/company-list.aspx. Included in the data is the sector and industry of which each company is a member. Download the CSV files and open them in an Excel spreadsheet and all the data will be right there.

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