COTERRA ENERGY INC (NYSE:CTRA) Emerges as a Compelling Undervalued Stock Candidate

The search for undervalued companies is a foundation of disciplined investing. One methodical approach uses filters to find stocks that seem fundamentally inexpensive based on numerical measures while also showing good business condition, earnings, and growth potential. This process seeks to find possible cases where the market price may not completely match a company's true worth, providing a safety buffer for investors. A recent filter using these ideas pointed to COTERRA ENERGY INC (NYSE:CTRA) as a stock deserving more examination.

Examining the Valuation

The main attraction of CTRA from a value viewpoint is its appealing valuation measures. The fundamental analysis report gives the company an 8 out of 10 in the Valuation group, showing it is priced low compared to both its industry and the wider market. This score is important for value investing, as it hints the stock's market price could be below its estimated true value, forming a possible opening.

Important valuation details are:

• Price-to-Earnings (P/E) Ratio: At 12.19, CTRA's P/E ratio is lower than 68% of similar companies in the Oil, Gas & Consumable Fuels industry and is under the current S&P 500 average of 26.34.
• Forward P/E Ratio: An even stronger number is the forward P/E of 8.98, which is lower than 81% of industry rivals.
• Price-to-Free-Cash-Flow and EV/EBITDA: Both ratios also point to a valuation that is fairly low next to the industry average.

For a value investor, these measures are the beginning. A low valuation gives that key buffer, or margin of safety, guarding against mistakes in study or unexpected market declines. That CTRA's valuation seems fair even when considering its expected growth (a low PEG ratio) gives more support to the view that the stock could be undervalued.

Reviewing Financial Condition and Earnings

A low stock price by itself is not enough reason to invest; the company must also have sound fundamentals. This is where financial condition and earnings become essential, as they help investors steer clear of "value traps", companies that are low-priced due to worsening fundamentals.

CTRA's financial condition gets a medium score of 5/10. The report mentions a good Debt-to-Equity ratio of 0.25, which is stronger than two-thirds of its industry peers, showing a careful balance sheet setup. The company also has a favorable Debt-to-Free-Cash-Flow ratio, meaning it can reduce debts promptly. Still, some liquidity measures, like the Quick Ratio, are noted as points of watchfulness. For a value investor, a mostly sound balance sheet with acceptable debt levels backs the idea that the company is steady enough to endure economic shifts while its valuation difference possibly narrows.

On earnings, CTRA gets a high score of 7/10, doing better than many in its field. This is an important test for value methods, as continued earnings are often a sign of a good business selling at a lower price.

Noticeable strong points are:

• High Margins: The company has a Gross Margin of 82.81% and an Operating Margin of 31.31%, doing better than a large portion of its industry peers.
• Good Returns: Its Return on Equity (11.18%) and Return on Invested Capital (7.86%) are in the stronger half of the industry.

This steady earnings record suggests the company has competitive strengths and effective operations, strengthening the thought that its low valuation may be out of step with its ability to earn.

Considering Growth Path

Lastly, for a value stock to achieve its possibility, it frequently needs a driver for growth to help the market adjust its price. CTRA displays positive movement here, receiving a high Growth score of 8/10. This mix of high growth and low valuation is somewhat uncommon and can be especially interesting.

The company's recent results and forecast are good:

• Past Growth: Revenue increased by more than 25% in the past year and has displayed a good growth pattern over several years.
• Earnings Growth: Earnings Per Share also saw notable growth of almost 27% over the last year.
• Future Predictions: Analysts project both EPS and Revenue to keep increasing at a good double-digit rate in the next few years.

For an investor using a value plan, this growth outline offers a possible way for the stock's true value to rise over time, which might lead to price gains as the market finally acknowledges it.

Summary

COTERRA ENERGY INC shows a profile that fits several main ideas of value investing: it is priced at a reduction to the market and its peers, keeps a profitable business with good margins, and is showing a strong growth path. While investors should observe the mixed signs in short-term liquidity, the full view is of a fundamentally stable company trading at what seems to be a fair, if not low, valuation. This mix makes it a notable candidate for more study by those filtering for undervalued possibilities.

For investors wanting to use a similar methodical process, you can find more stocks that fit these "Decent Value" standards using this pre-set stock filter.

Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer to buy or sell any securities. Investing carries risk, including the possible loss of principal. You should do your own study and talk with a qualified financial advisor before making any investment choices.