The shares of Bank of America Corporation (NYSE:BAC) and Encana Corporation (NYSE:ECA) were among the active stocks of the last trading sessions. Bank of America Corporation (NYSE:BAC) soared to 0.29% closing at the price of $27.89 whereas the shares of Encana Corporation (NYSE:ECA) declined -4.58% with the decrease of -0.41 points closing at the price of $8.55. Bank of America Corporation has currently decrease -5.9% in its stock over the period of 6-months while its rival Encana Corporation subtracted -34.88% in the previous 6-months.
Now we have to analyze the facts that if the stocks were worthy off investors’ money? The facts to analyze here are risks, profitability, returns and price trends.
Returns and Profitability
Profitability and returns are the main reason of investment, the investors are looking for profits that they get and return they should expect over the period of time.
The first and foremost return that is considered while making an investment is the ROI or Return on Investment. The ROI is the ratio between the profit against the cost of investment. Currently the ROI of Bank of America Corporation (NYSE:BAC) is 4.8% while the ROI of Encana Corporation (NYSE:ECA) is 6.6%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, BAC’s EBITDA Margin is NOT AVAILABLE whereas ECA’s is 9.3.
Both the profitability ratios suggest a mixed sentiment for Bank of America Corporation (NYSE:BAC) and Encana Corporation (NYSE:ECA).
EPS & Surprise Factor
Bank of America Corporation (NYSE:BAC) reported $0.66/share EPS for the previous quarter where analysts were predicting an EPS to be $0.62/share Thus beating the analyst Estimates with a Surprise Factor of 6.5 Percent. While, Encana Corporation (NYSE:ECA) reported EPS of $0.17/share in the last quarter. The analysts projected EPS of $0.13/share depicting a Surprise of 30.8 Percent.
Taking a look at Earnings per Share, Encana Corporation tends to be beating the analyst estimates more than Bank of America Corporation. so ECA is more profitable than BAC.
Technical Analysis of Bank of America Corporation & Encana Corporation
Moving average convergence divergence (MACD) shows that Bank of America Corporation (NYSE:BAC) is on a PRICE RELATIVITY trend While Encana Corporation (NYSE:ECA) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Bank of America Corporation was in BULLISH territory and Encana Corporation was in BEARISH territory.
BAC’s current statistics gauge that the stock candle is BEARISH with HIGH volatility. While ECA’s candle is BEARISH with HIGH.
EPS Growth Rate: BAC’s 29.2% versus ECA’s 37.8%
Another shareholder value can be analyzed through the EPS growth rate; the next 5 years EPS growth rate is predicted by the analysts after the analyzing the previous trends. The next 5 year EPS growth rate of Bank of America Corporation (NYSE:BAC) is predicted at 29.2% while Encana Corporation (NYSE:ECA) stands at 37.8%. These numbers suggest that ECA is more suitable investment in terms of EPS growth rate.
Financial Risk and Liquidity Concerns
The current ratio and the debt ratio are the two ratios that show the investor how quickly the company is able to payout its debt and how quickly it can cover its obligations. The current ratio of BAC stands at 0 while ECA is at 0.7 whereas the debt ratio of the prior is 1.74 while the debt ratio of the later is 0.88.
The values of the both ratios suggest that one is more liquid and other investment is more risk free.
While making an investment, another main factor to consider before investing is the analyst recommendation on the scale of 1 to 5 where 1 is strong buy, 2 is buy, 3 is hold, 4 is Sell and 5 is strong sell. Analyst recommend 2 for BAC and 1.9 for ECA which means BAC has Buy rating whereas ECA has Buy rating.
Another recommendation of analyst that is to be considered worthy is the price target. The mare price or price trend does not suggest the suitability of a stock. The price target set by analyst is also to be considered while investing as it suggests to what extent the stock will rise or fall in the near future. The price target set for BAC is $34.45 which is 19.04% of its current price while ECA has price target of 17.11 which is 50.03% of its current price.
Valuation is the process of determining the company’s worth for an investor, the valuation ratios give an insight to that worthiness.
BAC currently has price to earning P/E ratio of 12.13 whereas ECA has 21.32 while the forward P/E ratio for the prior stands at 9.7 and for the later it depicts the value of 7.72.
The price to Book P/B for BAC is 1.17, Price to Sale is at 4.37 and for ECA these ratios stand at 1.26 and 1.97.