Have Investors Already Priced In Cenovus Energy Inc’s (NYSE: CVE) Growth?

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Cenovus Energy Inc (NYSE: CVE) investors have enjoyed seeing the stock price increase by 15.1% over the last month. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at the company’s expected growth and valuation based on its most recent financial data to see if there is further upside moving forward.


Is Cenovus Energy Still Cheap?

The stock seems fairly valued at the moment according to 7 separate valuation analyses. Shares are trading roughly 7% below its intrinsic value. This means if you were to buy Cenovus Energy today, you’d be paying a reasonable price for it. If you believe that the stock is really worth $9.97, then there isn’t much room for the share price to appreciate beyond where it’s currently trading.

Cenovus Energy Inc Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF Revenue Exit $15.17 62.6%
10-yr DCF EBITDA Exit $12.00 28.6%
5-yr DCF EBITDA Exit $15.43 65.3%
Peer EBITDA Multiples $9.19 -1.5%
10-yr DCF Growth Exit $5.31 -43.1%
5-yr DCF Growth Exit $5.44 -41.7%
Dividend Discount Model (multi-stage) $7.24 -22.4%
Average $9.97 6.8%

Click on any of the analyses above to view the latest model with real-time data.

In addition, it seems like Cenovus Energy’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its beta of 0.92.


What Does The Future Of Cenovus Energy Look Like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations.

Cenovus Energy projected net income chartsource: finbox.io data explorer

Cenovus Energy’s earnings growth is expected to average -9.8% over the next five fiscal years. This could indicate that the core business is not doing very well or that margins are coming under pressure. Not ideal for growth investors.


How This Impacts You

Many investors separate stocks into value and growth categories based on quantitative metrics. However, one of the most famous investors in the world views this as foolish. In Warren Buffett’s 1992 letter to Berkshire Hathaway shareholders, Buffett touches upon a subject at odds with much of the investment industry:

“Most analysts feel they must choose between two approaches customarily thought to be in opposition: ‘value’ and ‘growth.’ Indeed, many investment professionals see any mixing of the two terms as a form of intellectual cross-dressing. We view that as fuzzy thinking… In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value.”

While investors tend to categorize stocks into value and growth, some of the most successful investors view growth as simply one component of a company’s value.

Cenovus Energy’s future growth is relatively low and the stock appears fairly valued at the moment according to our valuation models. As a shareholder, you may have already conducted your fundamental analysis on the company and the stock’s recent appreciation may have been expected. Therefore, it may be time for investors to take some chips off the table. For prospective investors looking to purchase shares of Cenovus Energy, it may be worth holding off until the stock develops a larger margin of safety.

But before making an investment decision, I recommend you continue to research Cenovus Energy to get a more comprehensive view of the company by looking at:

Valuation Metrics: what is Cenovus Energy’s short ratio and how does it compare to its publicly traded peers? It represents the percentage of total shares outstanding that is being shorted. View the short ratio here.

Risk Metrics: how much interest coverage does Cenovus Energy have? This is a ratio used to assess a firm’s ability to pay interest expenses based on operating profits (EBIT). View the company’s interest coverage here.

Efficiency Metrics: fixed asset turnover is calculated by dividing revenue by average fixed assets. View Cenovus Energy’s fixed asset turnover here.


Author: Brian Dentino

Expertise: financial technology, analyzing market trends

Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors.

Brian can be reached at brian@finbox.io.

As of this writing, Brian did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

1 Comment

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