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Anatomy of Success: Ecopetrol SA (EC)

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A company’s Zacks Rank is a great indication of how well it’s expected to perform over the next one to three months. Here at Zacks, we discuss how this ranking tool helps identify the best of the best, as only 5% of the Zacks Rank universe receives the exclusive rating of a #1 (Strong Buy).

Not only does this ranking help find the most elite stocks, but it also enables you to stay in a particular company while it continues to see price appreciation beyond the three-month horizon.

Below, you’ll find an example that perfectly illustrates how to trade a Zacks Rank #1 stock, and how to ride the wave of earnings estimates revisions for market-beating gains.

Ecopetrol SA (EC - Free Report)

Ecopetrol is a Colombia-based petroleum company focused on identifying opportunities primarily within the eastern Llanos Basin of Colombia, as well as in other areas of the country and in northern Peru. The company's operations include the extraction, collection, treatment, storage, and pumping or compression of hydrocarbons. Ecopetrol has four management divisions to handle the operations of 163 production fields concentrated in the upper, middle and lower Magdalena; the Eastern Plans and the Caribbean; and the provinces of Putumayo, Cesar and Norte de Santander.

EC was initially added to the Strong Buy list in late October last year and remained a #1 stock as the company prepared to release its third quarter fiscal 2017 earnings report. Q3 saw the company’s operational, net, and EBITDA margins at their highest levels over the past two years. Additionally, EC’s spread of the export crude basket versus Brent improved to 6.0/bl USD, marking the best of the past seven years. Shares closed that initial trading day at $10.79.

The stock was made a #1 again on March 9, most likely due to analyst bullishness as Ecopetrol readied for its fourth quarter earnings report. Six months after first becoming a Zacks Rank #1, shares of EC increased 62.7% to $17.56.

EC was added to the #1 list once again on March 30 soon after it reported Q4 and full-year 2017 results. For Ecopetrol, 2017 saw the successful execution of the global performance test of its new Cartagena Refinery. And, the company finally experienced “profitable growth,” with full-year net profit totaling 6.6 trillion pesos. Furthermore, EC met its 2017 production goal of 715 thousand barrels of oil equivalent per day. Almost seven months after becoming a #1 pick, the company’s stock price increased almost 80% to $19.33 per share.

EC maintained its Strong Buy status through mid-April but is currently a Zacks Rank #3 (Hold). Shares are trading at around $23.15, up 114.5% from when the company was first made a Strong Buy stock and nearly 134% higher in the past one-year period.

This table shows the price performance of EC (in red), as well as the 12-month forward looking EPS estimate (in green) from the time the stock first earned a Zacks Rank #1 (Strong Buy). During this stretch, EC never moved lower than a Zacks Rank #3 (Hold).

By utilizing the Zacks Rank, investors are able to easily identify elite stocks that are best positioned to beat the market on a consistent basis, and how to hold those top stocks as they continue to grow.

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