Encana (ECA) Highlighted As Today's Perilous Reversal Stock

Trade-Ideas LLC identified Encana ( ECA) as a "perilous reversal" (up big yesterday but down 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 $99.1 million.
  • ECA has traded 5.2 million shares today.
  • ECA is down 3.1% today.
  • ECA was up 6.8% 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 3.7%. Currently there are 9 analysts that rate Encana a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for Encana has been 11.5 million shares per day over the past 30 days. Encana has a market cap of $6.4 billion and is part of the basic materials sector and energy industry. Shares are down 41.5% year-to-date as of the close of trading on Friday.

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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 deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • 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 694.1% when compared to the same quarter one year ago, falling from $271.00 million to -$1,610.00 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. 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 $298.00 million or 61.14% 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.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 58.15%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 616.21% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ENCANA CORP increased its bottom line by earning $4.59 versus $0.31 in the prior year. For the next year, the market is expecting a contraction of 103.9% in earnings (-$0.18 versus $4.59).

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