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Encana Corporation (NYSE: ECA) shares fell by more than -4.13% this year and have recently fallen -1.39% or -0.18 dollars to establish at $ 12.78. Parsley Energy, Inc. (NYSE: PE), on the other hand, has risen by 5.67% since the beginning of the year on 23/07/2018. It is currently trading at $ 31.11 and has returned -1.21% over the last week.
Encana Corporation (NYSE: ECA) and Parsley Energy, Inc. (NYSE: PE) are the two most active shares in the industry based on trading volumes today. We will compare the two companies based on the strength of various metrics including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other. other.
Growth
A compound rate over time is a crucial determinant of the value of investment. Analysts expect ECA to increase its profits at an annual rate of 45.45% over the next 5 years. Comparatively, the EP is expected to grow at an annual rate of 49.95%. All things being equal, the higher growth rate of PE would imply a greater potential for capital appreciation.
Profitability and Returns
Growth does not mean much if it is done at the cost of low profitability. To account for differences in capital structure, we will use EBITDA margin and return on invested capital (ROCE) as measures of profitability and return. compared to an EBITDA margin of 57.39% for Parsley Energy, Inc. (PE). The return on investment of ECA is 6.60% while the private equity has a return on investment of 3.70%. The interpretation is that ECA activities generate a higher return on investment than PEs.
Cash Flow
Profits do not always accurately reflect the amount of cash that a company reports. The free cash flow of ECA ("FCF") shares for the last twelve months was -0.18. Comparatively, PE's free cash flow per share was -0.92. In terms of percentage of revenue, ACE's free cash flow was -3.9% while PE converted 0.03% of its revenue into cash flow. This means that for a given level of sales, PE can generate more free cash flow for investors.
Liquidity and Financial Risk
Liquidity and leverage ratios are important because they reveal the financial health of a business. ECA has a current ratio of 1.20 compared to 1.20 for PE. This means that ECA can more easily cover its most immediate liabilities over the next twelve months. The debt ratio of ACE is 0.85 versus a D / E of 0.43 for PE. ECA is therefore the most solvent of the two companies and has a lower financial risk.
Assessment
ECA trades at a forward P / E of 12.43, a P / B of 1.83 and a P / S of 2.78, compared to a P / E of 14.13 , a P / B of 1.61, and a P / S of 8.55 for PE. Since profits are the most important for investors, badysts tend to put more weight on the price / earnings ratio.
Targets and opinions on badyst prices
Price target to get an idea of the upside potential over the next year. ECA is currently priced at -25.31% at its one-year price target of 17.11. Comparatively, the PE is -24.23% compared to its price target of 41.06. This suggests that ECA is the best investment over the next year
Risk and Volatility
Beta is a metric that investors frequently use to badyze systematic risk of an action . A beta greater than 1 implies a volatility higher than the market average. Conversely, a security with a beta lower than 1 is considered less risky than the overall market. ECA has a beta of 2.01 and the beta version of PE is -0.49. PE shares are therefore the least volatile of the two shares
Insider activity and investor sentiment
The short-term interest is another tool that badysts use to evaluate investor sentiment . It represents the percentage of marketable shares of an action that are subject to a short circuit. ECA has a short ratio of 0.98 versus a short interest of 2.34 for PE. This implies that the market is currently less bearish on ECA's prospects.
Abstract
Encana Corporation (NYSE: ECA) defeats Parsley Energy, Inc. (NYSE: PE) out of a total of 8 of the 14 factors compared between the two stocks. ECA generates a higher return on investment, has higher cash flow per share and higher liquidity. In terms of valuation, ECA is the cheapest of the two actions based on profits and sales, ECA is more undervalued compared to its price target. Finally, ECA has better sentiment signals based on short-term interests.
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