Encana Corporation (ECA) Valuation Is Far Too Optimistic Stock, But A Bull Can Still Profit

The price of Encana Corporation (NYSE:ECA) stock ended January 15, 2020 trading at $4.23 which saw uptrend of -9.81% since the beginning of 2020. For most investors, the -0.24% rally in the share price could have prompted them to sell the stock, but doing that would be a mistake as it would be taking into consideration only the short-term performance of the stock.

A look at the ECA stock today shows that it has lost -38.52% of its value over the past one year, which has led to some investors becoming concerned about the short-term performance of Encana Corporation (NYSE:ECA). If we turn to the stock analysts in general, they revealed that most of them are still bullish about the chances of the shares. The consensus rating from analysts for Encana Corporation (ECA) is 2.5 which is a ,neutral rating. Over the past week, the stock has been rated as a Buy 8 times while it has been rated as a Hold 8 times. The 52-week high price for ECA is $7.7 which is attained on April 24 while its 52-week low currently stands at $3.77 and was reached on December 03. At the moment, the stock is trading $-0.31 below its YTD moving average set at $4.54.

Moving on, Encana Corporation (ECA) last released its earnings for the September 2020 quarter of the fiscal year. The company performed decently over the past three months, with its earnings up 275% year-over-year at $0.15. The company brought a surprise of 7 as analysts were predicting $0.14 per share. The revenue generated by Encana Corporation in the September 2020 quarter surged by 48% to reach $1.87 billion. This is high compared to the $1.26 billion it recorded in the same quarter last year. To see what traders should watch in its December 2019 financial results, analysts have consensus earnings per share of $0.16 which is lower than the $0.32 recorded in the same quarter a year ago. Over the next 12 months, the earnings per share are expected to move by -7.92%. If it achieves that, then the company firmly believes that its long-term annual earnings growth rate target set at 12.01 % could be achieved. The company has also recorded a revenue of $7.54 billion over the past 12 months.

In order to determine if the stock is worthy of your patience, you should know that Encana Corporation (NYSE:ECA) is now trading at 3.42X the earnings per share recorded over the past 12 months. This is a downtrend compared to the readings of the sector which is 16.14X while the industry average stands at 13.21X. The most popular way to value a stock is to look at its historic Price-to-Earnings (P/E) ratio with the help of its earnings report over the past 12 months. Encana Corporation was able to achieve an EPS of $1.24 during the last four quarters. The P/E ratio is widely known due to the fact that it is widely used, simple, effective, and, tautologically.

On Wednesday, January 15 of 2020, the 14-day Absolute ATR (Average True Range) for ECA moved by $0.17. Over the past seven days, the stock’s average daily volatility stood at 3.34%. A stock with a low volatility is usually a good one as it means that investors are very confident in the stock. Encana Corporation’s trading volume has recently moved to 17.51 million, which is compared with the average daily volume of 19.88 million shares.

The daily chart for ECA, points out that the company has recorded -4.94% losses over the past six months. However, it is still 12.2% higher than its most recent low trading price. The performance of the stock over the past five days shows that it is down -6% though it is -7.17% below its three-week moving average. It is worthy to know that price action is not always clear. There are times when a stock will undergo some negatives, trade erratically within some range or even act very unpredictable. When that happens, then making use of moving averages makes the pattern clearer for traders. Comparing to 50-day SMA, the price of the stock has dropped by -2.91% while it is down -15.52% against the 200-day SMA. This is usually seen as the last support line for a stock, as a move downward could signal a bearish trend or market. The daily chart of ECA reveals that it has lost some grounds as it ended Wednesday with a 0% fall over the past 30 days.