Eclipse Resources Corporation (NYSE:ECR), an energy company based in United States, received a lot of attention from a substantial price movement on the NYSE in the over the last few months, increasing to $2.56 at one point, and dropping to the lows of $1.29. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Eclipse Resources’s current trading price of $1.32 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Eclipse Resources’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Eclipse Resources
What’s the opportunity in Eclipse Resources?
Eclipse Resources appears to be overvalued according to my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Eclipse Resources’s ratio of 40.6x is above its peer average of 12.33x, which suggests the stock is overvalued compared to the Oil and Gas industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Eclipse Resources’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Eclipse Resources?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Eclipse Resources’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? ECR’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe ECR should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on ECR for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for ECR, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Eclipse Resources. You can find everything you need to know about Eclipse Resources in the latest infographic research report. If you are no longer interested in Eclipse Resources, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.