The Canadian economy has shown signs of stabilization of late, thanks in part to more sustainable energy prices and a monetary policy stance from the Bank of Canada that’s been more conducive to encouraging business across the board. Companies like Cenovus Energy (TSX: CVE) have certainly benefited in this current environment, as this energy stock’s chart below indicates.
Let’s dive into where Cenovus stock could be headed here, as it’s also worth pointing out that this chart has been relatively rangebound for the better part of two years.
Source: Getty Images
Solid long-term potential
Cenovus is an integrated energy company focused on not only the production of crude oil, but the refining, marketing and delivery of refined petroleum products and natural gas to a range of customers in North America. For those bullish on the future of the oil sands, Cenovus remains a top player in Alberta, and continues to play a large role in the energy independence story we’re seeing play out on this continent.
The dynamics in the oil and gas sector have shifted dramatically in recent years, with a number of geopolitical conflicts continuing to impact prices for consumers. These stronger demand side macro impacts have helped companies like Cenovus a great deal, without even looking at the company’s supply side growth of 800,000 barrels per day in the first half of this year. If these levers continue to work in the same direction, investors can bank on continued outperformance for Cenovus relative to its peers and also other sectors of the economy.
Strong financials
As investors might expect, Cenvous’ top-line growth rate of more than 21% led to rock-solid earnings growth for investors over the past year. Strong operating margins, driven by high external and inter-segment sales are expected to continue, as the company continues to focus on improved efficiency in its core operations, while also benefiting from macro tailwinds on the back end.
I think Cenovus is a top oil and gas play long-term investors may want to consider for future growth. Those bullish on the oil sands and ability of the Canadian energy sector to continue to outperform over the long haul may want to consider Cenvous as part of a well-diversified portfolio, particularly with this stock trading at just 9 times earnings while also providing a 2.7% dividend yield.
