COTERRA ENERGY INC (NYSE:CTRA): A Prime Candidate for Affordable Growth

The search for growth stocks at reasonable prices remains a cornerstone of many investment strategies, particularly in markets where valuations can become stretched. The "Affordable Growth" approach aims to find companies showing strong expansion potential without requiring an excessive premium from investors. This method balances the wish for capital appreciation with the discipline of careful valuation, looking for equities that display solid growth paths, good profitability, and healthy finances while trading at sensible multiples. This strategy helps investors avoid paying too much for growth and concentrates on lasting business models.

COTERRA ENERGY INC (NYSE:CTRA) appears as a candidate matching this description, receiving an overall fundamental rating of 6 out of 10. The company's activities cover key energy areas in the United States, including the Permian Basin, Marcellus Shale, and Anadarko Basin, offering a varied production base. A detailed look at its fundamental condition is in its full fundamental analysis report.

Growth Path

The growth part is vital to the Affordable Growth strategy, as it finds companies with the possibility for future earnings expansion. Coterra shows solid growth traits, scoring a 7 in this group. The company displays good momentum in both recent performance and future expectations.

• Revenue Growth: Over the past year, revenue increased by a solid 17.10%. More notably, the five-year average revenue growth is 21.44%, pointing to a maintained and strong expansion period.
• Earnings Momentum: Earnings Per Share (EPS) increased by 10.00% in the last year. While the five-year EPS growth is more moderate, the forward view is positive, with analysts forecasting annual EPS growth of 14.42%.
• Increasing Growth: A good sign for investors is that the EPS growth rate is predicted to rise in the next years compared to the recent past.

Attractive Valuation

The valuation score of 8 is a foundation of the Affordable Growth idea, making sure investors are not paying too much for this growth. Coterra seems fundamentally inexpensive across several important measures, especially when measured against wider market indices.

• Price-to-Earnings:
  • The current P/E ratio is 10.89, which is much lower than the S&P 500 average of 27.02.
  • Inside its industry, Coterra is less expensive than nearly 70% of similar companies.
• Forward-Looking Multiples:
  • The Forward P/E ratio is even more attractive at 6.63, indicating the market has not yet accounted for expected earnings growth.
  • This makes the stock less expensive than 88% of its industry rivals and much less expensive than the S&P 500's forward average.
• Cash Flow and EBITDA: The company also shows good valuations based on Enterprise Value to EBITDA and Price/Free Cash Flow ratios, ranking less expensive than most of its industry group.

Profitability and Financial Condition

While the Affordable Growth screen focuses on valuation and growth, it also needs acceptable basic business condition and profitability to make sure it is lasting. Coterra's profitability score of 7 shows a fundamentally good operation.

• Good Margins: The company has a Gross Margin of 82.52%, doing better than over 91% of its industry. Its Operating Margin of 31.25% and Profit Margin of 23.80% also put it in the top part of its sector.
• Steady Cash Generation: Coterra has reported positive earnings and operating cash flow in each of the past five years, showing financial strength.

The financial condition score of 5, however, points to some areas for watching. The company keeps a fair Debt-to-Equity ratio of 0.29, doing better than many peers, and its Debt-to-Free-Cash-Flow ratio is good. Still, its Altman-Z score is in a careful "grey zone," and there has been a recent rise in its debt-to-assets ratio, which investors should note.

In summary, Coterra Energy presents a strong case for the Affordable Growth investor. It joins an increasing earnings view with a very low valuation, all while keeping high profitability margins. The company's good free cash flow generation backs its activities and dividend, though its financial condition measures need continued attention. For investors looking for growth at a reasonable price in the energy sector, CTRA stands as a notable candidate that fits a careful investment method.

This review of Coterra Energy was found using a specific screening method. Investors curious about finding other companies that meet similar "Affordable Growth" rules can find more results through this stock screener link.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. The opinions expressed are based on current fundamental data, which is subject to change. All investments involve risk, including the possible loss of capital. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.