Encana (ECA) versus VAALCO Energy (EGY) Critical Review

VAALCO Energy (NYSE: EGY) and Encana (NYSE:ECA) are both oils/energy companies, but which is the better stock? We will compare the two businesses based on the strength of their earnings, valuation, profitability, analyst recommendations, institutional ownership, risk and dividends.

Analyst Ratings

This is a breakdown of recent recommendations for VAALCO Energy and Encana, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
VAALCO Energy 0 1 0 0 2.00
Encana 0 3 15 2 2.95

VAALCO Energy presently has a consensus price target of $2.00, indicating a potential upside of 144.59%. Encana has a consensus price target of $15.15, indicating a potential upside of 12.31%. Given VAALCO Energy’s higher possible upside, equities research analysts plainly believe VAALCO Energy is more favorable than Encana.

Profitability

This table compares VAALCO Energy and Encana’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
VAALCO Energy 3.43% 77.99% 4.27%
Encana 34.15% 17.15% 7.82%

Institutional & Insider Ownership

38.0% of VAALCO Energy shares are owned by institutional investors. Comparatively, 68.9% of Encana shares are owned by institutional investors. 2.6% of VAALCO Energy shares are owned by company insiders. Comparatively, 0.1% of Encana shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Dividends

Encana pays an annual dividend of $0.06 per share and has a dividend yield of 0.4%. VAALCO Energy does not pay a dividend. Encana pays out 7.5% of its earnings in the form of a dividend.

Valuation & Earnings

This table compares VAALCO Energy and Encana’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
VAALCO Energy $59.78 million 0.80 -$26.55 million $0.04 20.44
Encana $2.92 billion 4.50 -$944.00 million $0.80 16.86

VAALCO Energy has higher earnings, but lower revenue than Encana. Encana is trading at a lower price-to-earnings ratio than VAALCO Energy, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

VAALCO Energy has a beta of 0.32, meaning that its stock price is 68% less volatile than the S&P 500. Comparatively, Encana has a beta of 2.15, meaning that its stock price is 115% more volatile than the S&P 500.

Summary

Encana beats VAALCO Energy on 11 of the 17 factors compared between the two stocks.

VAALCO Energy Company Profile

VAALCO Energy, Inc. is an independent energy company. The Company is engaged in the acquisition, exploration, development and production of crude oil and natural gas. Its segments include Gabon, Angola, Equatorial Guinea, the United States, and Corporate and other, which includes corporate and operations support. It owns producing properties and conducts exploration activities as an operator in Gabon, West Africa; conducts exploration activities as an operator in Angola, West Africa, and participates in exploration and development activities as a non-operator in Equatorial Guinea, West Africa. In the United States, it operates unconventional resource properties in North Texas and hold undeveloped leasehold acreage in Montana. It also owns minor interests in conventional production activities as a non-operator in the United States. Its Etame Marin block is located offshore the Republic of Gabon. It owns over 640-acre lease in the Hefley field (Granite Wash formation) in North Texas.

Encana Company Profile

Encana Corporation is an energy producer that is focused on developing its multi-basin portfolio of natural gas, oil and natural gas liquids (NGLs) producing plays. The Company’s operations also include the marketing of natural gas, oil and NGLs. All of its reserves and production are located in North America. It operates through three segments: Canadian Operations, USA Operations and Market optimization. Its Canadian Operations segment includes the exploration for, development of, and production of natural gas oil and NGLs and other related activities within Canada. Its Canadian operations include Montney in northeast British Columbia and northwest Alberta and Duvernay in west central Alberta. The USA Operations include the exploration for, development of, and production of natural gas, oil and NGLs, and other related activities within the United States. The Market Optimization activities are primarily responsible for the sale of the Company’s production to third party customers.

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