Encana (ECA) Spotted As Roof Leaker Today

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Encana ( ECA) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) 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 $103.9 million.
  • ECA has traded 1.4 million shares today.
  • ECA is trading at 1.77 times the normal volume for the stock at this time of day.
  • ECA crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in ECA with the Ticky from Trade-Ideas. See the FREE profile for ECA NOW at Trade-Ideas

More details on ECA:

Encana Corporation, together with its subsidiaries, is engaged in exploration for, development, 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 1.3%. ECA has a PE ratio of 49.6. Currently there are 7 analysts that rate Encana a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Encana has been 4.3 million shares per day over the past 30 days. Encana has a market cap of $15.8 billion and is part of the basic materials sector and energy industry. Shares are up 18.7% year-to-date as of the close of trading on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Encana as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive.

Highlights from the ratings report include:
  • Net operating cash flow has increased to $767.00 million or 38.44% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.24%.
  • ENCANA CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ENCANA CORP turned its bottom line around by earning $0.31 versus -$3.79 in the prior year. This year, the market expects an improvement in earnings ($1.73 versus $0.31).
  • The gross profit margin for ENCANA CORP is rather high; currently it is at 52.58%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, ECA's net profit margin of 17.06% compares favorably to the industry average.
  • Compared to its closing price of one year ago, ECA's share price has jumped by 25.43%, exceeding the performance of the broader market during that same time frame. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 62.9% when compared to the same quarter one year ago, falling from $730.00 million to $271.00 million.

null

If you liked this article you might like

These 10 Stocks Are Helping Drive the Market Rally Monday

These 10 Stocks Are Helping Drive the Market Rally Monday

Charts Are Positive for Encana

Charts Are Positive for Encana

Finding Bullish and Bearish Market Reversals

Finding Bullish and Bearish Market Reversals

Parsley Energy Picks Up Permian Assets From Apache, Others: Source

Parsley Energy Picks Up Permian Assets From Apache, Others: Source

'Mad Money' Lightning Round: Vodafone, Encana, Arconic, AdvanSix

'Mad Money' Lightning Round: Vodafone, Encana, Arconic, AdvanSix