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Should Value Investors Buy Ecopetrol (EC) Stock?

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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company value investors might notice is Ecopetrol (EC). EC is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A.

Investors will also notice that EC has a PEG ratio of 0.64. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. EC's industry has an average PEG of 0.79 right now. Within the past year, EC's PEG has been as high as 0.73 and as low as 0.41, with a median of 0.54.

Finally, investors will want to recognize that EC has a P/CF ratio of 2.55. 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. EC's P/CF compares to its industry's average P/CF of 6. Over the past 52 weeks, EC's P/CF has been as high as 2.91 and as low as 2.02, with a median of 2.39.

These are just a handful of the figures considered in Ecopetrol'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 EC is an impressive value stock right now.


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Zacks Investment Research