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Why Ecopetrol S.A. Stock Popped 12% Today

By Rich Smith – Sep 12, 2018 at 6:45PM

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An oil stock rises on rising oil prices. Imagine that.

What happened

Shares of Colombian integrated oil and gas producer Ecopetrol S.A. (NYSE: EC) surged $2.66 to close 11.8% higher on Wednesday. And the reason for this, it would appear, is as simple as higher oil prices.

An offshore oil drilling platform

Despite Wall Street's reservations, Ecopetrol shares are on the march higher. Image source: Getty Images.

So what

WTI crude prices jumped 1.6% in Wednesday trading, surpassing $70 a barrel, while Brent crude rose 0.9% and is closing in on $80 a barrel. That's obviously good news for a company that produces oil -- a fact that investors in Ecopetrol were quick to notice.

Now what

Oil's revival this year has been good news for Ecopetrol, which has seen its stock more than double on the prospect of stronger profits. In fact, Ecopetrol's profits were up 169% in its most recent quarterly report.

Despite the run-up in stock price, though, Ecopetrol shares still don't appear terribly expensive -- just 14 times earnings, and with a projected long-term growth rate in excess of 14%. This probably comes as a surprise to Wall Street, where, according to a survey by S&P Global Market Intelligence, most analysts have sell ratings on the stock.

But with their modest valuation, strong growth projections, and a 2.6% dividend kicker, I wouldn't be surprised to see Ecopetrol stock go up some more.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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