Encana Corp (ECA.TO) Buy, Sell or Hold

Encana Corp (ECA.TO)

4.96

-0.23 (4.43%)

as of Jan 24, 2020, 9:00:00 pm Market Open.

267 watching

BUY

He would be very careful with most oil names. But some are really too good to be true. This is one. Trading at 3.8 times EV to CF. Balance sheet is fine. He models growth at 25% for their earnings. This is a monster in a depressed environment. The only caveat is if oil and nat gas prices stay down or even go lower from here.

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COMMENT

Represents the entire Canadian energy patch. The energy sector is being abandoned as investors move into other areas. Very cheap, there's some leverage there, so you could have an above average year, but doesn't see it doubling in the next year.

DON'T BUY

Don't see a lot of value in the Canadian Oil and Gas sector. There is some in the integrated companies. He would avoid the sector in general. (Analysts’ price target is $13.39)

TOP PICK

It's oversold so finding good footing at $9. Good market cap size. Resistance at $11 with $8.70 as an exit. (Analysts’ price target is $13.59)

SELL ON STRENGTH

Normally we don't see this kind of movement. You have to take in the context. Looks pretty much oversold. A good dividend payer. Not a disaster. But would look for an exit at $12.

COMMENT

It has had a really good run. The Canadian companies are being tarnished with the same brush. There will be turmoil in this sector for a long time. He considers this to be more of a trading stock.

BUY

The Canadian inventory numbers today were quite bullish for gas. ECA-T has more exposure to US gas, however. It is a reasonable investment for the long term.

COMMENT

They did a good move out of Canada a few years ago. They have better growth there. The street really soured on an acquisition they did. Global demand for oil seems to be coming back a little bit.

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HOLD

They track the oil price a lot more today than they did in the past. People think their recent acquisition was buying an asset in distress. It may take a while for the new acquisition to prove itself.

WEAK BUY

The earnings forecast of $1.07 per share would suggest an intrinsic value of $22 and it trades around book value. It is cheap today if those forecasts come through. (Analysts’ price target is $18.08)

DON'T BUY

They did a recent transaction to add to their US business. Management tried to right size the ship, but their long term return on capital is not as good as others. He would not call it the highest quality in the space.

RISKY

There's been a lot of volatility in natural gas. ECA has been in the dog-house too long. This entire space (oil, gold, commodities) is too cyclical for his tastes. But ECA now has a good valuation, and as investors sell off America, ECA could benefit from this inflow back into Canadian natural resources.

DON'T BUY

They are challenged because they just bought Newfield. Can Encana do their thing with what the street thought were not good assets. It is extremely inexpensive, but he would not be buying this name now.

PARTIAL BUY

The analysts generally like this stock but you have to look at what the commodity will do. A year out the Gas outlook is neutral in his opinion. He does not believe analysts' targets. He would accumulate here to trade it at the top of the range.

BUY

This is a liquids-rich player in the Permian basin and in the Canadian Montney. They just announced sale of their San Juan assets for $400 million US dollars. Their debt at the end of Q2 was $4 billion, so this helps them knock that down significantly. The company is growing its production in its core areas, both in Canada and the US. Institutional investors like this stock a lot. They are using their land much more efficiently than is typical. Rather than drilling 8 wells per pad, they can drill at multiple levels and take oil from 50 wells per pad. The company also uses walking rigs to make all this drilling more efficient. This is a name that investors want to own for the long term.

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