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Are Investors Undervaluing Encana (ECA) Right Now?

Zacks Equity Research
Estee Lauder (EL) is at a 52-week high, but can investors hope for more gains in the future? We take a look at the company's fundamentals for clues.

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

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.

Encana (ECA) is a stock many investors are watching right now. ECA is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 8.07 right now. For comparison, its industry sports an average P/E of 11.13. Over the last 12 months, ECA's Forward P/E has been as high as 19.02 and as low as 4.86, with a median of 10.50.

ECA is also sporting a PEG ratio of 0.81. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ECA's PEG compares to its industry's average PEG of 1.36. ECA's PEG has been as high as 1.90 and as low as 0.23, with a median of 0.59, all within the past year.

Investors should also recognize that ECA has a P/B ratio of 0.92. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 0.94. Over the past year, ECA's P/B has been as high as 2.09 and as low as 0.74, with a median of 1.12.

These are only a few of the key metrics included in Encana's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, ECA looks like an impressive value stock at the moment.


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