When TSX stock prices slide, it’s easy to panic and retreat to the sidelines. But savvy investors know that dips in the market can be a great time to scoop up quality stocks at a discount. One Canadian TSX stock that deserves a closer look right now is Cenovus Energy (TSX:CVE). It’s down about 43% from 52-week highs, and while that drop might seem discouraging, it could actually signal a rare opportunity for long-term investors who are willing to buy and hold.
Source: Getty Images
About Cenovus
Cenovus is no newcomer to the Canadian energy scene. Based in Calgary, it’s one of the country’s largest integrated oil and gas producers. The TSX stock operates in several segments, including oil sands, conventional oil and gas production, offshore assets, refining, and retail marketing. That range of operations gives it a built-in layer of protection against market swings. When oil prices are high, upstream operations benefit. When prices soften, downstream refining and marketing help balance things out. That’s part of what makes Cenovus a compelling investment, especially when the price dips.
Still, Cenovus didn’t have the smoothest ride in its most recent earnings release. For the fourth quarter of 2024, the TSX stock reported earnings per share (EPS) of just $0.05. That missed analysts’ estimates, which had been pegged at $0.32. Revenue also came in light at $8.4 billion compared to the expected $11.08 billion. The shortfall was mainly due to unplanned outages and refinery challenges in the U.S., which dented performance temporarily. That said, the issues aren’t long-term in nature, and Cenovus has already signalled that it expects production and refining operations to normalize in the first half of 2025.
Despite those earnings misses, Cenovus hasn’t pulled back on returning value to shareholders. In 2024, it returned $3.2 billion through a mix of dividends and share buybacks. Of that, $1.6 billion was paid out in dividends, and $1.4 billion went toward reducing the share count through repurchases. For investors who care about consistent capital returns, that’s a strong signal that Cenovus believes in its long-term fundamentals and wants shareholders to share in that confidence.
Future focus
Looking ahead, analysts remain optimistic about where the TSX stock is headed. Cenovus is expected to report its first-quarter 2025 earnings on May 8. Estimates are calling for earnings of $0.40 per share on revenue of $9.53 billion. That would mark a substantial improvement over the previous quarter and suggests that the company is already bouncing back from the issues that held it back at the end of 2024.
Even more promising is the forecast for full-year earnings. Analysts expect Cenovus to grow earnings by 28% next year, climbing from $1.49 per share to $1.91. If that materializes, it could easily justify a much higher share price than today’s level. And based on current valuation metrics, it already looks like a bargain. The TSX stock trades at a forward price-to-earnings ratio of 8.14, compared to the industry average closer to 9.8. That discount suggests the market hasn’t yet priced in the company’s recovery or its long-term potential.
Cenovus also maintains a healthy balance sheet, which gives it more flexibility to weather ups and downs. As oil prices fluctuate and the global energy landscape evolves, having strong financial footing is essential. The company has been steadily paying down debt since its major acquisition of Husky Energy, and it’s now in a much stronger position than it was just a few years ago. That bodes well for future dividend hikes, buybacks, or even strategic investments.
Bottom line
So, while short-term challenges have dragged Cenovus’s stock price down, the long-term picture looks much brighter. For Canadian investors looking to buy a solid TSX stock at a discount, this could be the perfect time to start or add to a position. The stock may be down 43%, but the fundamentals are strong, and that’s often when the best gains are made. Patience, in this case, could pay off handsomely.
