Trade-Ideas LLC identified

Encana

(

ECA

) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Encana as such a stock due to the following factors:

  • ECA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $104.9 million.
  • ECA has traded 10.0 million shares today.
  • ECA is up 3.1% today.
  • ECA was down 6.2% yesterday.

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More details on ECA:

Encana Corporation, together with its subsidiaries, engages in the development, exploration, production, and marketing of natural gas, oil, and natural gas liquids in Canada and the United States. The stock currently has a dividend yield of 0.7%. Currently there are 6 analysts that rate Encana a buy, 4 analysts rate it a sell, and 5 rate it a hold.

The average volume for Encana has been 14.6 million shares per day over the past 30 days. Encana has a market cap of $7.0 billion and is part of the basic materials sector and energy industry. Shares are up 51.9% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Encana as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • The debt-to-equity ratio of 1.23 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, ECA maintains a poor quick ratio of 0.90, which illustrates the inability to avoid short-term cash problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ENCANA CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $83.00 million or 72.14% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • ECA has underperformed the S&P 500 Index, declining 6.01% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • ECA, with its very weak revenue results, has greatly underperformed against the industry average of 24.0%. Since the same quarter one year prior, revenues plummeted by 56.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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