COTERRA ENERGY INC (NYSE:CTRA) Offers Affordable Growth with Strong Profitability

The search for growth companies trading at reasonable prices remains a cornerstone of many investment strategies. The Growth At a Reasonable Price (GARP) approach aims to identify businesses with strong expansion potential that are not priced at excessive premiums. One method to find such opportunities is by using a stock screener that filters for companies demonstrating solid growth, sound profitability, adequate financial health, and an attractive valuation. This multi-faceted analysis helps investors avoid overpaying for growth while ensuring the underlying company is on solid financial footing.

COTERRA ENERGY INC (NYSE:CTRA) operates as a diversified energy company focused on the exploration, development, and production of oil and natural gas properties within the continental United States. The company's operations are spread across key basins, including the Permian Basin, the Marcellus Shale, and the Anadarko Basin.

Growth Trajectory

A core tenet of the affordable growth strategy is identifying companies with a clear and sustainable growth path. Coterra Energy exhibits several positive indicators in this area, earning a ChartMill Growth Rating of 7 out of 10. The company's historical revenue growth has been strong, averaging 21.44% annually over recent years. More importantly, future expectations are promising, with analysts projecting:

• An average annual Earnings Per Share (EPS) growth of 14.42%.
• An average annual Revenue growth of 16.04%.

This forward-looking growth, coupled with an accelerating EPS growth rate, suggests the company's expansion narrative remains intact. For investors seeking affordable growth, this combination of strong historical performance and positive future projections is a key attraction.

Valuation Metrics

The "reasonable price" aspect is critical to ensure investors are not overpaying for future growth. Coterra Energy stands out with a strong ChartMill Valuation Rating of 8 out of 10, indicating its shares are priced attractively relative to its earnings and growth prospects. Key valuation metrics highlight this appeal:

• Price/Earnings Ratio: 11.19, which is significantly cheaper than the S&P 500 average of 26.51.
• Price/Forward Earnings Ratio: 7.76, also well below the S&P 500 average and indicating cheapness relative to future earnings estimates.
• Enterprise Value to EBITDA: This ratio also points to a somewhat cheap valuation compared to industry peers.

The low PEG ratio, which adjusts the P/E ratio for growth, further indicates that the stock's current price may not fully reflect its expected earnings growth, making it an interesting candidate for valuation-conscious growth investors.

Profitability and Financial Health

While growth and valuation are primary drivers, the affordable growth strategy also requires a company to be fundamentally sound. Coterra Energy's profitability is a notable strength, with a ChartMill Profitability Rating of 7. The company demonstrates:

• A solid Profit Margin of 23.80%, outperforming a majority of its industry peers.
• Strong Operating and Gross Margins, indicating efficient operations.
• Consistently positive earnings and operating cash flow over the past five years.

The company's financial health, with a rating of 5, shows a more mixed picture. On the positive side, Coterra has a manageable Debt-to-Equity ratio of 0.29 and a healthy Debt-to-Free-Cash-Flow ratio, suggesting it can pay down debt relatively quickly. However, investors should note some minor concerns, such as a decline in its debt-to-assets ratio compared to the previous year and a current ratio that is only marginally above 1. These factors do not signal immediate distress but are areas for ongoing monitoring to ensure the company's growth is supported by a stable financial base.

Conclusion

COTERRA ENERGY INC (CTRA) presents a profile that aligns well with the principles of affordable growth investing. The company is positioned for continued expansion, as evidenced by its strong growth rating and positive analyst projections. Crucially, this growth is available at a reasonable price, with valuation metrics suggesting the stock is cheap relative to both the broader market and its own future earnings potential. While its financial health has some minor points to watch, its solid profitability provides a stable foundation. For investors using a GARP methodology, CTRA represents a stock where growth potential and valuation discipline intersect.

This stock was identified using a predefined "Affordable Growth" screen. You can find more investment ideas that fit this strategy by viewing the full screen results here.

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 information presented should not be used as the sole basis for making any investment decision. It is strongly recommended that you conduct your own research and consult with a qualified financial advisor before making any investment decisions.