Oil & Gas Stocks: Is Now The Time To Buy ECA Marcellus Trust I (NYSE:ECT)?
ECA Marcellus Trust I (NYSE:ECT), a US$36.09M small-cap, operates in the oil and gas industry which has persevered through a continued decline in oil prices since 2014. However, energy-sector analysts are forecasting for the entire industry, a strong double-digit growth of 10.02% in the upcoming year , and a low 3.83% growth over the next couple of years. This rate is below the growth rate of the US stock market as a whole. Is the oil and gas industry an attractive sector-play right now? Below, I will examine the sector growth prospects, and also determine whether ECA Marcellus Trust I is a laggard or leader relative to its energy sector peers. See our latest analysis for ECA Marcellus Trust I
What’s the catalyst for ECA Marcellus Trust I’s sector growth?
The oil and gas sector has been negative 40% in the past five years, due to the oil price crash. Although profitability is always a key metric, in the oil and gas industry, growth in production and reserves has often been more important. However, recently the sector saw a reversal in the downturn, and over the past year, the industry turnaround led to growth in the teens, beating the US market growth of 10.01%. ECA Marcellus Trust I leads the pack with its impressive earnings growth of 74.78% over the past year. This proven growth may make ECA Marcellus Trust I a more expensive stock relative to its peers.
Is ECA Marcellus Trust I and the sector relatively cheap?
The energy sector’s PE is currently hovering around 13.35x, lower than the rest of the US stock market PE of 18.95x. This means the industry, on average, is relatively undervalued compared to the wider market – a potential mispricing opportunity here! Though, the industry returned a similar 10.21% on equities compared to the market’s 10.36%, potentially illustrative of a turnaround. On the stock-level, ECA Marcellus Trust I is trading at a lower PE ratio of 6.17x, making it cheaper than the average oil and gas stock. In terms of returns, ECA Marcellus Trust I generated 11.24% in the past year, which is 1.03% over the oil and gas sector.
Next Steps:
ECA Marcellus Trust I recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. In addition to this, its PE is below its energy peers, suggesting it is also trading at a relatively cheaper price. If ECA Marcellus Trust I has been on your watchlist for a while, now may be the best time to enter into the stock. Its industry-beating growth delivered may not have been fully accounted for in its shares given its lower PE ratio relative to its peers. However, before you make a decision on the stock, I suggest you look at ECA Marcellus Trust I’s fundamentals in order to build a holistic investment thesis.
1. 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.
2. Historical Track Record: What has ECT’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of ECA Marcellus Trust I? 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.
