Pick Up Shares of Crescent Point Energy Corp. While They’re Extremely Undervalued

Could this be your second chance to buy shares of Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) at just $14?

| More on:

Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) has been in the house of pain for over two years now. The stock plummeted over 70% from the June 2014 peak to the January 2016 trough thanks to the rout in oil prices.

Oil prices gradually recovered, and so too did the stock of Crescent Point, but the stock started dropping again in the latter part of 2016, even though oil prices kept climbing higher. The price of oil is now above $50, but Crescent Point has fallen back to the low $14 level seen during the oil rout in early 2016.

Could this be your second chance to jump into Crescent Point at a huge discount?

The management team at Crescent Point has been focused on cutting costs while attempting to keep production at a reasonably high level. Such initiatives include using innovative technology to lower costs and improve operational efficiencies. These investments will pay off many years down the road, especially if oil decides to pull back again. There’s no question that Crescent Point is in much better shape than it was a year ago, and it’s surprising that the stock managed to give up most of the gains from the first half of 2016.

Many pundits believe oil prices will break the $60 mark by the conclusion of this year. If this ends up happening, then it’s likely that Crescent Point will enjoy a huge amount of upside as the company crushes analyst expectations in the quarters to come. Oil prices may even go substantially higher than the $60 mark because demand is still high and U.S. consumption is expected to grow for 2017.

With oil prices above $50, we can expect a boost to the company’s 2017 development program, which should boost production by 183,000 barrels of oil per day or about 10% more than last year. If oil prices continue to rise higher, then we will see production increase, and the stock could quickly soar into the atmosphere.

Shares are severely undervalued

Shares of Crescent Point are severely undervalued at current levels and offer a considerable margin of safety. The stock is trading at levels not seen since the trough of the oil rout, and this current sell-off should be treated as a huge buying opportunity for long-term investors that want to profit from an oil rebound.

The company currently trades at a 0.8 price-to-book multiple, a 2.9 price-to-sales multiple, and a 4.7 price-to-cash flow multiple, all of which are lower than the company’s five-year historical averages of 1.5, 3.9, and 5.6, respectively. With a price-to-book multiple at almost half of what it normally is, investors who buy now can own shares at a gigantic discount to their intrinsic value. The company had a price-to-book multiple over two for the years following the Great Recession, which is more than double what it is now.

If you’re a deep-value investor or a contrarian investor looking for a rebound, then look no further than Crescent Point. This is a second chance to get shares at a huge discount if you didn’t buy the dip in the early part of last year.

Stay smart. Stay hungry. Stay Foolish.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any stocks mentioned.

More on Energy Stocks

Arrowings ascending on a chalkboard
Energy Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Canadian Natural Resources stock is well set up to beat the TSX as it continues to generate strong cash flows…

Read more »

energy industry
Energy Stocks

2 TSX Energy Stocks to Buy Hand Over Fist Now

These two rallying TSX energy stocks can continue delivering robust returns to investors in the long term.

Read more »

green energy
Energy Stocks

1 Magnificent TSX Dividend Stock Down 37% to Buy and Hold Forever

This dividend stock has fallen significantly from poor results, but zoom in and there are some major improvements happening.

Read more »

oil tank at night
Energy Stocks

3 Energy Stocks Already Worth Your While

Here's why blue-chip TSX energy stocks such as Enbridge should be part of your equity portfolio in 2024.

Read more »

Solar panels and windmills
Energy Stocks

1 Beaten-Down Stock That Could Be the Best Bet in the TSX

This renewable energy stock could be one of the best buys you make this year, as the company starts to…

Read more »

Dice engraved with the words buy and sell
Energy Stocks

Is Enbridge Stock a Buy, Sell, or Hold?

Here's why Enbridge (TSX:ENB) remains a top dividend stock long-term investors may want to consider, despite current risks.

Read more »

Gas pipelines
Energy Stocks

If You Had Invested $5,000 in Enbridge Stock in 2018, This Is How Much You Would Have Today

Enbridge's high dividend yield hasn't made up for its dismal total returns.

Read more »

Bad apple with good apples
Energy Stocks

Avoid at All Costs: This Stock Is Portfolio Poison

A mid-cap stock commits to return more to shareholders, but some investors remember the suspension of dividends a few years…

Read more »