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Are Investors Undervaluing Ecopetrol (EC) Right Now?

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Zacks Equity Research
·3 min read
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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.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One stock to keep an eye on is Ecopetrol (EC). EC is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock holds a P/E ratio of 8.92, while its industry has an average P/E of 25.89. EC's Forward P/E has been as high as 24.64 and as low as 7.13, with a median of 13.65, all within the past year.

We should also highlight that EC has a P/B ratio of 1.56. 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 1.62. Over the past year, EC's P/B has been as high as 1.77 and as low as 0.20, with a median of 1.42.

Finally, we should also recognize that EC has a P/CF ratio of 7.55. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 17.95. EC's P/CF has been as high as 8.58 and as low as 0.51, with a median of 0.81, all within the past year.

Value investors will likely look at more than just these metrics, but the above data helps show that Ecopetrol is likely undervalued currently. And when considering the strength of its earnings outlook, EC sticks out at as one of the market's strongest value stocks.


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