Intrinsic value of Encana - ECA

Previous Close

$10.73

  Intrinsic Value

$0.86

stock screener

  Rating & Target

str. sell

-92%

Previous close

$10.73

 
Intrinsic value

$0.86

 
Up/down potential

-92%

 
Rating

str. sell

We calculate the intrinsic value of ECA stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -34.01
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  2,918
  2,976
  3,045
  3,123
  3,211
  3,308
  3,415
  3,531
  3,657
  3,793
  3,938
  4,094
  4,260
  4,437
  4,625
  4,825
  5,036
  5,260
  5,497
  5,747
  6,011
  6,290
  6,583
  6,893
  7,219
  7,563
  7,925
  8,306
  8,707
  9,128
  9,572
Variable operating expenses, $m
 
  7,230
  7,390
  7,573
  7,778
  8,005
  8,255
  8,526
  8,820
  9,137
  9,477
  9,563
  9,951
  10,364
  10,804
  11,270
  11,764
  12,286
  12,839
  13,423
  14,040
  14,691
  15,377
  16,101
  16,863
  17,666
  18,511
  19,401
  20,337
  21,322
  22,358
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  4,741
  7,230
  7,390
  7,573
  7,778
  8,005
  8,255
  8,526
  8,820
  9,137
  9,477
  9,563
  9,951
  10,364
  10,804
  11,270
  11,764
  12,286
  12,839
  13,423
  14,040
  14,691
  15,377
  16,101
  16,863
  17,666
  18,511
  19,401
  20,337
  21,322
  22,358
Operating income, $m
  -1,823
  -4,254
  -4,345
  -4,450
  -4,567
  -4,697
  -4,840
  -4,995
  -5,163
  -5,344
  -5,539
  -5,469
  -5,691
  -5,927
  -6,178
  -6,445
  -6,727
  -7,026
  -7,342
  -7,676
  -8,029
  -8,401
  -8,794
  -9,208
  -9,643
  -10,103
  -10,586
  -11,095
  -11,630
  -12,193
  -12,786
EBITDA, $m
  -964
  -3,306
  -3,382
  -3,469
  -3,566
  -3,674
  -3,793
  -3,922
  -4,062
  -4,213
  -4,374
  -4,547
  -4,732
  -4,928
  -5,137
  -5,359
  -5,594
  -5,842
  -6,105
  -6,383
  -6,676
  -6,986
  -7,312
  -7,656
  -8,018
  -8,400
  -8,802
  -9,225
  -9,670
  -10,138
  -10,631
Interest expense (income), $m
  397
  410
  422
  436
  452
  471
  491
  513
  537
  563
  591
  621
  653
  687
  724
  762
  804
  847
  893
  942
  994
  1,048
  1,106
  1,166
  1,230
  1,297
  1,368
  1,443
  1,522
  1,604
  1,691
Earnings before tax, $m
  -1,620
  -4,663
  -4,767
  -4,886
  -5,019
  -5,168
  -5,330
  -5,508
  -5,700
  -5,907
  -6,129
  -6,090
  -6,344
  -6,614
  -6,902
  -7,207
  -7,531
  -7,873
  -8,236
  -8,619
  -9,023
  -9,450
  -9,899
  -10,374
  -10,874
  -11,400
  -11,954
  -12,538
  -13,152
  -13,798
  -14,477
Tax expense, $m
  -676
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -944
  -4,663
  -4,767
  -4,886
  -5,019
  -5,168
  -5,330
  -5,508
  -5,700
  -5,907
  -6,129
  -6,090
  -6,344
  -6,614
  -6,902
  -7,207
  -7,531
  -7,873
  -8,236
  -8,619
  -9,023
  -9,450
  -9,899
  -10,374
  -10,874
  -11,400
  -11,954
  -12,538
  -13,152
  -13,798
  -14,477

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  834
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  14,653
  14,106
  14,430
  14,801
  15,218
  15,679
  16,185
  16,736
  17,333
  17,976
  18,666
  19,404
  20,191
  21,030
  21,921
  22,867
  23,869
  24,929
  26,051
  27,236
  28,488
  29,808
  31,201
  32,669
  34,215
  35,844
  37,559
  39,364
  41,264
  43,262
  45,364
Adjusted assets (=assets-cash), $m
  13,819
  14,106
  14,430
  14,801
  15,218
  15,679
  16,185
  16,736
  17,333
  17,976
  18,666
  19,404
  20,191
  21,030
  21,921
  22,867
  23,869
  24,929
  26,051
  27,236
  28,488
  29,808
  31,201
  32,669
  34,215
  35,844
  37,559
  39,364
  41,264
  43,262
  45,364
Revenue / Adjusted assets
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
Average production assets, $m
  8,998
  9,179
  9,390
  9,632
  9,902
  10,203
  10,532
  10,891
  11,279
  11,697
  12,146
  12,627
  13,139
  13,685
  14,264
  14,880
  15,532
  16,222
  16,952
  17,723
  18,538
  19,397
  20,303
  21,258
  22,265
  23,325
  24,441
  25,615
  26,851
  28,152
  29,520
Working capital, $m
  361
  -423
  -432
  -443
  -456
  -470
  -485
  -501
  -519
  -539
  -559
  -581
  -605
  -630
  -657
  -685
  -715
  -747
  -781
  -816
  -854
  -893
  -935
  -979
  -1,025
  -1,074
  -1,125
  -1,179
  -1,236
  -1,296
  -1,359
Total debt, $m
  5,827
  5,947
  6,146
  6,373
  6,628
  6,911
  7,222
  7,559
  7,925
  8,319
  8,742
  9,195
  9,677
  10,191
  10,738
  11,317
  11,931
  12,582
  13,269
  13,996
  14,763
  15,572
  16,426
  17,326
  18,274
  19,272
  20,324
  21,430
  22,595
  23,820
  25,108
Total liabilities, $m
  8,527
  8,647
  8,846
  9,073
  9,328
  9,611
  9,922
  10,259
  10,625
  11,019
  11,442
  11,895
  12,377
  12,891
  13,438
  14,017
  14,631
  15,282
  15,969
  16,696
  17,463
  18,272
  19,126
  20,026
  20,974
  21,972
  23,024
  24,130
  25,295
  26,520
  27,808
Total equity, $m
  6,126
  5,459
  5,585
  5,728
  5,889
  6,068
  6,264
  6,477
  6,708
  6,957
  7,224
  7,509
  7,814
  8,139
  8,483
  8,849
  9,237
  9,648
  10,082
  10,540
  11,025
  11,536
  12,075
  12,643
  13,241
  13,872
  14,535
  15,234
  15,969
  16,742
  17,556
Total liabilities and equity, $m
  14,653
  14,106
  14,431
  14,801
  15,217
  15,679
  16,186
  16,736
  17,333
  17,976
  18,666
  19,404
  20,191
  21,030
  21,921
  22,866
  23,868
  24,930
  26,051
  27,236
  28,488
  29,808
  31,201
  32,669
  34,215
  35,844
  37,559
  39,364
  41,264
  43,262
  45,364
Debt-to-equity ratio
  0.951
  1.090
  1.100
  1.110
  1.130
  1.140
  1.150
  1.170
  1.180
  1.200
  1.210
  1.220
  1.240
  1.250
  1.270
  1.280
  1.290
  1.300
  1.320
  1.330
  1.340
  1.350
  1.360
  1.370
  1.380
  1.390
  1.400
  1.410
  1.410
  1.420
  1.430
Adjusted equity ratio
  0.383
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -944
  -4,663
  -4,767
  -4,886
  -5,019
  -5,168
  -5,330
  -5,508
  -5,700
  -5,907
  -6,129
  -6,090
  -6,344
  -6,614
  -6,902
  -7,207
  -7,531
  -7,873
  -8,236
  -8,619
  -9,023
  -9,450
  -9,899
  -10,374
  -10,874
  -11,400
  -11,954
  -12,538
  -13,152
  -13,798
  -14,477
Depreciation, amort., depletion, $m
  859
  948
  963
  981
  1,001
  1,023
  1,047
  1,073
  1,101
  1,132
  1,164
  922
  959
  999
  1,041
  1,086
  1,134
  1,184
  1,237
  1,294
  1,353
  1,416
  1,482
  1,552
  1,625
  1,703
  1,784
  1,870
  1,960
  2,055
  2,155
Funds from operations, $m
  412
  -3,715
  -3,804
  -3,905
  -4,019
  -4,145
  -4,284
  -4,435
  -4,599
  -4,775
  -4,965
  -5,168
  -5,385
  -5,615
  -5,861
  -6,121
  -6,397
  -6,689
  -6,998
  -7,325
  -7,670
  -8,034
  -8,417
  -8,822
  -9,248
  -9,697
  -10,170
  -10,668
  -11,192
  -11,743
  -12,322
Change in working capital, $m
  -213
  -8
  -10
  -11
  -12
  -14
  -15
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -37
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
Cash from operations, $m
  625
  -3,707
  -3,794
  -3,894
  -4,006
  -4,131
  -4,268
  -4,418
  -4,581
  -4,756
  -4,944
  -5,146
  -5,361
  -5,590
  -5,834
  -6,093
  -6,367
  -6,657
  -6,965
  -7,289
  -7,632
  -7,994
  -8,376
  -8,778
  -9,202
  -9,649
  -10,119
  -10,614
  -11,135
  -11,683
  -12,259
Maintenance CAPEX, $m
  0
  -657
  -670
  -685
  -703
  -723
  -745
  -769
  -795
  -823
  -854
  -887
  -922
  -959
  -999
  -1,041
  -1,086
  -1,134
  -1,184
  -1,237
  -1,294
  -1,353
  -1,416
  -1,482
  -1,552
  -1,625
  -1,703
  -1,784
  -1,870
  -1,960
  -2,055
New CAPEX, $m
  -1,132
  -181
  -211
  -241
  -271
  -300
  -329
  -359
  -388
  -418
  -449
  -480
  -512
  -546
  -580
  -615
  -652
  -690
  -730
  -771
  -814
  -859
  -906
  -955
  -1,006
  -1,060
  -1,116
  -1,175
  -1,236
  -1,300
  -1,368
Cash from investing activities, $m
  -29
  -838
  -881
  -926
  -974
  -1,023
  -1,074
  -1,128
  -1,183
  -1,241
  -1,303
  -1,367
  -1,434
  -1,505
  -1,579
  -1,656
  -1,738
  -1,824
  -1,914
  -2,008
  -2,108
  -2,212
  -2,322
  -2,437
  -2,558
  -2,685
  -2,819
  -2,959
  -3,106
  -3,260
  -3,423
Free cash flow, $m
  596
  -4,545
  -4,675
  -4,821
  -4,980
  -5,154
  -5,343
  -5,546
  -5,764
  -5,998
  -6,247
  -6,513
  -6,795
  -7,095
  -7,413
  -7,749
  -8,105
  -8,481
  -8,879
  -9,298
  -9,740
  -10,207
  -10,698
  -11,215
  -11,760
  -12,334
  -12,937
  -13,572
  -14,241
  -14,943
  -15,682
Issuance/(repayment) of debt, $m
  -1,116
  179
  199
  227
  255
  283
  310
  338
  366
  394
  423
  452
  483
  514
  546
  580
  614
  650
  688
  727
  767
  809
  854
  900
  948
  999
  1,051
  1,107
  1,164
  1,225
  1,289
Issuance/(repurchase) of shares, $m
  1,129
  4,771
  4,893
  5,029
  5,181
  5,346
  5,526
  5,721
  5,931
  6,156
  6,396
  6,375
  6,648
  6,939
  7,247
  7,573
  7,919
  8,284
  8,670
  9,077
  9,507
  9,961
  10,438
  10,942
  11,472
  12,030
  12,618
  13,236
  13,887
  14,571
  15,290
Cash from financing (excl. dividends), $m  
  13
  4,950
  5,092
  5,256
  5,436
  5,629
  5,836
  6,059
  6,297
  6,550
  6,819
  6,827
  7,131
  7,453
  7,793
  8,153
  8,533
  8,934
  9,358
  9,804
  10,274
  10,770
  11,292
  11,842
  12,420
  13,029
  13,669
  14,343
  15,051
  15,796
  16,579
Total cash flow (excl. dividends), $m
  614
  405
  416
  436
  456
  475
  494
  513
  533
  552
  572
  315
  336
  358
  380
  404
  428
  453
  479
  506
  534
  563
  594
  626
  660
  695
  732
  770
  811
  853
  897
Retained Cash Flow (-), $m
  41
  -4,771
  -4,893
  -5,029
  -5,181
  -5,346
  -5,526
  -5,721
  -5,931
  -6,156
  -6,396
  -6,375
  -6,648
  -6,939
  -7,247
  -7,573
  -7,919
  -8,284
  -8,670
  -9,077
  -9,507
  -9,961
  -10,438
  -10,942
  -11,472
  -12,030
  -12,618
  -13,236
  -13,887
  -14,571
  -15,290
Prev. year cash balance distribution, $m
 
  775
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -3,591
  -4,476
  -4,593
  -4,725
  -4,871
  -5,032
  -5,208
  -5,398
  -5,604
  -5,824
  -6,060
  -6,312
  -6,581
  -6,866
  -7,170
  -7,491
  -7,831
  -8,191
  -8,571
  -8,973
  -9,397
  -9,844
  -10,315
  -10,812
  -11,335
  -11,886
  -12,466
  -13,076
  -13,718
  -14,393
Discount rate, %
 
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.20
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.37
  29.79
  31.28
PV of cash for distribution, $m
 
  -3,337
  -3,839
  -3,608
  -3,372
  -3,132
  -2,888
  -2,641
  -2,395
  -2,150
  -1,911
  -1,679
  -1,457
  -1,247
  -1,053
  -876
  -716
  -576
  -455
  -352
  -267
  -198
  -144
  -102
  -70
  -47
  -31
  -20
  -12
  -7
  -4
Current shareholders' claim on cash, %
  100
  65.7
  43.0
  28.1
  18.4
  12.0
  7.8
  5.1
  3.3
  2.2
  1.4
  0.9
  0.6
  0.4
  0.3
  0.2
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

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.

FINANCIAL RATIOS  of  Encana (ECA)

Valuation Ratios
P/E Ratio -11.1
Price to Sales 3.6
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 16.7
Price to Free Cash Flow -20.6
Growth Rates
Sales Growth Rate -34%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -49.3%
Cap. Spend. - 3 Yr. Gr. Rate -16%
Financial Strength
Quick Ratio 14
Current Ratio 0
LT Debt to Equity 94.2%
Total Debt to Equity 95.1%
Interest Coverage -3
Management Effectiveness
Return On Assets -4.7%
Ret/ On Assets - 3 Yr. Avg. -3.4%
Return On Total Capital -8.1%
Ret/ On T. Cap. - 3 Yr. Avg. -7.1%
Return On Equity -15.4%
Return On Equity - 3 Yr. Avg. -11.6%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 56%
Gross Margin - 3 Yr. Avg. 67.8%
EBITDA Margin -12.5%
EBITDA Margin - 3 Yr. Avg. -19.6%
Operating Margin -62.5%
Oper. Margin - 3 Yr. Avg. -59.1%
Pre-Tax Margin -55.5%
Pre-Tax Margin - 3 Yr. Avg. -59.6%
Net Profit Margin -32.4%
Net Profit Margin - 3 Yr. Avg. -35.6%
Effective Tax Rate 41.7%
Eff/ Tax Rate - 3 Yr. Avg. 34.4%
Payout Ratio -5.4%

ECA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ECA stock intrinsic value calculation we used $2918 million for the last fiscal year's total revenue generated by Encana. The default revenue input number comes from 2016 income statement of Encana. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ECA stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.6%, whose default value for ECA is calculated based on our internal credit rating of Encana, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Encana.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ECA stock the variable cost ratio is equal to 243.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ECA stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 7.1% for Encana.

Corporate tax rate of 27% is the nominal tax rate for Encana. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ECA stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ECA are equal to 308.4%.

Life of production assets of 13.7 years is the average useful life of capital assets used in Encana operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ECA is equal to -14.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $6126 million for Encana - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 972.993 million for Encana is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Encana at the current share price and the inputted number of shares is $10.4 billion.

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▶ ETFs with exposure to Encana Corp. : December 29, 2017   [Dec-29-17 11:53AM  Capital Cube]
▶ What You Must Know About Encana Corporations (TSE:ECA) ROE   [Dec-27-17 04:07PM  Simply Wall St.]
▶ Where Does Wall Street Think Encana Can Trade in 2018?   [Dec-26-17 07:31AM  Market Realist]
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▶ ETFs with exposure to Encana Corp. : December 18, 2017   [Dec-18-17 03:23PM  Capital Cube]
▶ Oil Prices: No Happy New Year in 2018?   [Dec-17-17 02:47PM  Motley Fool]
▶ ETFs with exposure to Encana Corp. : December 7, 2017   [Dec-07-17 01:34PM  Capital Cube]
▶ Stocks With Rising Relative Strength: Encana   [03:00AM  Investor's Business Daily]
▶ How Encana Stock Reacted to 3Q17 Earnings   [09:01AM  Market Realist]
▶ A Look at Encanas Free Cash Flow in 3Q17   [07:32AM  Market Realist]
▶ A Close Look at Encanas 3Q17 Operational Performance   [Nov-13-17 03:45PM  Market Realist]
▶ Why Encanas Revenues Were Lower in 3Q17   [02:15PM  Market Realist]
▶ Encanas Lower Profits in 3Q17   [12:42PM  Market Realist]
▶ Stock Market News For Nov 9, 2017   [Nov-09-17 09:29AM  Zacks]
▶ Encana misses 3Q profit forecasts   [06:27AM  Associated Press]
▶ What to Watch When Encana Corp Reports Q3 Results   [Nov-06-17 04:36PM  Motley Fool]
▶ Stocks With Rising Relative Strength: Encana   [Nov-02-17 03:00AM  Investor's Business Daily]
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Financial statements of ECA
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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