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Should Value Investors Buy Ecopetrol (EC) Stock?

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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

Ecopetrol (EC - Free Report) is a stock many investors are watching right now. EC is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock has a Forward P/E ratio of 10.23. This compares to its industry's average Forward P/E of 28.24. Over the past 52 weeks, EC's Forward P/E has been as high as 24.64 and as low as 3.90, with a median of 13.65.

Investors should also recognize that EC has a P/B ratio of 1.59. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 1.62. Over the past year, EC's P/B has been as high as 1.77 and as low as 0.17, with a median of 1.40.

Finally, our model also underscores that EC has a P/CF ratio of 7.71. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 17.95. Within the past 12 months, EC's P/CF has been as high as 8.58 and as low as 0.44, with a median of 0.80.

These are only a few of the key metrics included in Ecopetrol's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, EC looks like an impressive value stock at the moment.


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