COTERRA ENERGY INC (NYSE:CTRA): A Prime Affordable Growth Stock with Strong Fundamentals

Investors looking for growth opportunities at fair prices often consider the "Affordable Growth" strategy, which finds stocks with good growth prospects, steady profitability, and strong finances, all while trading at reasonable prices. This method balances the search for high-growth companies with the caution of avoiding expensive assets, lowering risk while still offering room for gains. One stock that meets these criteria is COTERRA ENERGY INC (NYSE:CTRA), an energy company involved in oil and natural gas exploration and production in the U.S.

Growth: A Major Factor

The Affordable Growth screen looks for companies with a Growth rating above 7, and CTRA meets this with an 8/10 in this area. The company has shown strong revenue growth, with a 17.1% year-over-year rise and a notable 21.4% average yearly growth over the past five years. Earnings per share (EPS) have also increased by 10% in the last year, and analysts expect 25.7% annual EPS growth in the future. This forward momentum indicates that CTRA is not just relying on past performance but is set for further growth, a key point for growth-focused investors.

Fair Valuation Measures

A core part of the Affordable Growth strategy is making sure growth is not overvalued. CTRA’s Valuation rating of 8/10 highlights its appeal here. The stock trades at a P/E ratio of 11.6, much lower than the S&P 500 average of 27.0, and its forward P/E of 7.6 is below the industry average. Its PEG ratio, which considers growth expectations, also shows the stock is priced fairly relative to its earnings outlook. These figures suggest CTRA offers growth potential without the high prices often seen with fast-growing companies.

Profitability and Financial Stability

While growth and valuation are key to the Affordable Growth strategy, profitability and financial health are just as important for long-term success. CTRA has a Profitability rating of 7/10, backed by strong margins, including a gross margin of 79.6%, better than 90% of its industry peers. Its operating margin (31.0%) and return on equity (10.8%) are also solid.

Financial health, rated 5/10, presents some mixed results. CTRA has a low debt-to-equity ratio (0.29) and good liquidity, but its declining operating margins and recent rise in debt-to-assets need attention. Still, the company’s consistent free cash flow helps balance these concerns.

Why These Factors Are Important

The Affordable Growth strategy focuses on steady growth at fair prices to avoid speculative risks while still offering growth potential. CTRA’s mix of strong revenue and earnings growth, along with its reasonable valuation, makes it an attractive choice. Its profitability ensures growth is supported by efficient operations, and its manageable debt levels lower financial risks.

For a closer look at CTRA’s fundamentals, see the full fundamental analysis report here.

Finding More Affordable Growth Options

CTRA is just one example of a stock that fits the Affordable Growth criteria. Investors interested in similar opportunities can check other candidates using the Affordable Growth stock screener, which filters for companies with solid growth, fair valuations, and healthy finances.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research or consult a financial advisor before making any investment decisions.