As of July 18, 2023, Coterra Energy Inc (CTRA, Financial) has witnessed a 3.68% change in its stock price, now standing at $26.46. With a market cap of $20 billion and sales of $9.1 billion, the company's GF Value is estimated at $45.8, suggesting that the stock is significantly undervalued. This analysis is based on key factors such as historical trading multiples, past performance adjustments, and future business performance estimates.
Coterra Energy is an independent exploration and production company, formed after a 2021 merger with Cabot and Cimarex. Operating in Appalachia, the Permian Basin, and Oklahoma, Coterra Energy's proved reserves were 2.4 billion barrels of oil equivalent by the end of 2022. The company's net production that year was approximately 633 million barrels of oil equivalent per day, with natural gas making up 74% of this.
GF Value: A Comprehensive Analysis
According to the GuruFocus Value calculation, Coterra Energy (CTRA, Financial) is significantly undervalued. The GF Value is an estimation of the fair value at which the stock should ideally be traded. It takes into account the historical multiples at which the stock has traded, the past business growth, and analyst estimates of future business performance. When the price of a stock is significantly above the GF Value Line, it is considered overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher. Given Coterra Energy's current price and market cap, the stock appears to be significantly undervalued.
As Coterra Energy is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company’s financial strength before deciding whether to buy shares. Coterra Energy has a cash-to-debt ratio of 0.38, which ranks worse than 58.08% of companies in the Oil & Gas industry. Based on this, GuruFocus ranks Coterra Energy’s financial strength as 7 out of 10, suggesting a fair balance sheet.
Profitability
Companies that have been consistently profitable over the long term offer less risk for investors. Coterra Energy has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $9.1 billion and EPS of $5.22. Its operating margin is 58.52%, which ranks better than 92.33% of companies in the Oil & Gas industry. Overall, the profitability of Coterra Energy is ranked 9 out of 10, indicating strong profitability.
Growth
Growth is an essential factor in the valuation of a company. The 3-year average annual revenue growth rate of Coterra Energy is 31.8%, which ranks better than 84.72% of companies in the Oil & Gas industry. The 3-year average EBITDA growth rate is 38.4%, which ranks better than 76.04% of companies in the Oil & Gas industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted cost of capital (WACC) provides another perspective on its profitability. Coterra Energy’s ROIC for the past 12 months is 22.86, and its cost of capital is 5.63.
Conclusion
In conclusion, the stock of Coterra Energy (CTRA, Financial) appears to be significantly undervalued. The company's financial condition is fair, its profitability is strong, and its growth ranks better than 76.04% of companies in the Oil & Gas industry. To learn more about Coterra Energy stock, you can check out its 30-Year Financials here.
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