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Is Encana (ECA) Stock Undervalued Right Now?

Zacks Equity Research

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

Encana (ECA) is a stock many investors are watching right now. ECA is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 8.90, which compares to its industry's average of 12.48. ECA's Forward P/E has been as high as 11.39 and as low as 5.71, with a median of 7.53, all within the past year.

Investors should also note that ECA holds a PEG ratio of 0.89. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ECA's PEG compares to its industry's average PEG of 1.45. Within the past year, ECA's PEG has been as high as 1.57 and as low as 0.26, with a median of 0.80.

Another valuation metric that we should highlight is ECA's P/B ratio of 0.63. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 0.94. ECA's P/B has been as high as 1.06 and as low as 0.50, with a median of 0.67, over the past year.

Finally, investors will want to recognize that ECA has a P/CF ratio of 2.07. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 3.35. Over the past 52 weeks, ECA's P/CF has been as high as 4.55 and as low as 1.66, with a median of 2.49.

These are just a handful of the figures considered in Encana's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that ECA is an impressive value stock right now.

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Zacks Investment Research