Head-To-Head Survey: Encana (ECA) & Apache (APA)

Encana (NYSE: ECA) and Apache (NYSE:APA) are both large-cap oils/energy companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, profitability, earnings, dividends, risk and institutional ownership.

Dividends

Encana pays an annual dividend of $0.06 per share and has a dividend yield of 0.5%. Apache pays an annual dividend of $1.00 per share and has a dividend yield of 2.7%. Encana pays out 7.6% of its earnings in the form of a dividend. Apache pays out 57.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Institutional & Insider Ownership

68.3% of Encana shares are held by institutional investors. Comparatively, 94.7% of Apache shares are held by institutional investors. 0.1% of Encana shares are held by company insiders. Comparatively, 0.5% of Apache shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
Encana 19.08% 5.95% 2.64%
Apache 10.60% -0.70% -0.25%

Analyst Ratings

This is a summary of current recommendations and price targets for Encana and Apache, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Encana 0 1 17 2 3.05
Apache 6 9 2 0 1.76

Encana presently has a consensus target price of $15.55, suggesting a potential upside of 40.60%. Apache has a consensus target price of $45.07, suggesting a potential upside of 18.75%. Given Encana’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Encana is more favorable than Apache.

Volatility & Risk

Encana has a beta of 2.07, indicating that its share price is 107% more volatile than the S&P 500. Comparatively, Apache has a beta of 1.05, indicating that its share price is 5% more volatile than the S&P 500.

Earnings and Valuation

This table compares Encana and Apache’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Encana $2.92 billion 3.69 -$944.00 million $0.79 13.99
Apache $5.35 billion 2.68 -$1.41 billion $1.73 21.79

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

Summary

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

About Encana

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.

About Apache

Apache Corporation is an independent energy company. The Company explores for, develops, and produces natural gas, crude oil and natural gas liquids. The Company’s production segments include: the United States, Egypt and the United Kingdom North Sea. It also pursues exploration interests in Suriname. In North America, the Company has three onshore regions: The Permian region, The Midcontinent/Gulf Coast region. The Permian region located in West Texas and New Mexico includes the Permian sub-basins, the Midland Basin, Central Basin Platform/Northwest Shelf and Delaware Basin. The Midcontinent/Gulf Coast region includes the Granite Wash, Tonkawa, Canyon Lime, Marmaton, and Cleveland formations of the West Anadarko Basin, the Woodford-SCOOP and Stack plays located in Central Oklahoma, and the Eagle Ford shale in South East Texas.

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