What Should You Know About Encana Corporation’s (TSE:ECA) Future?
After Encana Corporation’s (TSX:ECA) earnings announcement in December 2017, analyst consensus outlook seem pessimistic, as a -38.99% fall in profits is expected in the upcoming year relative to the past 5-year average growth rate of 0.17%. Presently, with earnings at US$827.00M, we should see this fall to US$504.55M by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here. See our latest analysis for Encana
How is Encana going to perform in the near future?
The longer term expectations from the 12 analysts of ECA is tilted towards the positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To understand the overall trajectory of ECA’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
This results in an annual growth rate of 12.62% based on the most recent earnings level of US$827.00M to the final forecast of US$1.05B by 2021. This leads to an EPS of $1.57 in the final year of projections relative to the current EPS of $0.85. Growth in earnings appears to be a result of reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. However, the expansion of the current 20.88% margin is not expected to be sustained, as it begins to contract to 17.11% by the end of 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Encana, there are three key aspects you should further examine:
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Valuation: What is Encana worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Encana is currently mispriced by the market.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Encana? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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.
