Integrated energy giant Cenovus Energy (TSX:CVE) is currently a momentum investor’s friend. Up 27% during the past trading month, the $55 billion Canadian energy stock ranks high on sentiment metrics in the oil patch. However, it is not only the positive vibes on CVE that are influencing investment decisions. The large-cap TSX energy stock appears undervalued on some fundamental metrics today, making it a strong candidate for a long-term buy-and-hold strategy. Despite the valuation appeal, new investors still have to downplay one or two issues.
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Should you buy Cenovus Energy stock at all-time highs?
Cenovus stock is having a good run in February 2026. It is printing new 52-week highs, recently hitting C$30.15 on the TSX. The run-up to its fourth-quarter 2025 earnings report due on February 19 is full of promise. The company has just closed a major acquisition of oil sands peer MEG Energy in an $8.6 billion deal, debt included. This deal is supposed to unlock over $400 million in synergistic benefits by 2028. Management’s commentary on how integration with MEG is progressing, especially on the synergies front, will be a major data point for the market to digest.
An extra $400 million in cost savings trickling down to the combined company’s income statement to boost profits and cash flow is welcome. Global oil and gas prices have been complicit lately, and Bay Street analysts’ average earnings per share (EPS) estimate for the fourth quarter of 2025 and the first quarter of 2026 have been trending higher, up 26% during the past 60 days to $0.28 per share. CVE’s story is a good read for traders right now.
That said, legendary investor Warren Buffett has always been famously skeptical of touted merger synergies during corporate acquisition actions. He views them as convenient fiction to justify overpriced acquisitions. The MEG deal closed at a 47% premium. It’s critical that we see early signs of the expected synergies between Cenovus and MEG materializing in 2026 and beyond. Cenovus must deliver, and the February earnings report will give early hints. MEG assets could grow Cenovus’s annual productivity by 15% to 20% in 2026. If the larger oil company contains costs, the deal could be accretive to revenue, earnings, and cash flow.
Is it too early to judge Cenovus on the MEG deal?
It’s still too early for investors to see tangible merger benefits from the MEG transaction. The deal closed in November 2025, and the upcoming earnings will only include about six weeks of MEG’s contribution to production growth, revenue, and earnings. The market may have to wait longer for definitive progress post-acquisition.
Outlook for Cenovus Energy stock for 2026
Cenovus stock’s current positive momentum is encouraging, but its sustainability depends on usually volatile oil prices remaining stable or rising from current levels above US$62 WTI, while the company grows production and sustains its recently improved refinery efficiency in the United States.
Beyond the recent merger and the unpredictable impact of oil prices, Cenovus Energy stock has had perennial challenges regarding U.S. refinery operations. Low utilization rates, in the low 90% ranges, have been a nagging problem for some time, only to show significant progress during the third quarter of 2025 to print a 99% utilization rate. Sustained higher refinery throughput in 2026 will be reassuring news for investors. But management guidance for 2026 implies utilization rates of 91% to 95%, a dip from third quarter achievements.
Encouragingly, CVE stock trades at a forward P/E under 24, which appears reasonable for a cash flow positive energy giant that could grow earnings by 24% over the next five years. A forward price-earnings-to-growth (PEG) ratio of 0.8 implies shares could be slightly undervalued given the company’s earnings growth potential.
While a dividend yield of 2.8% doesn’t seem attractive enough for passive income purposes, Cenovus has raised dividends at double-digit annual rates during the past three years. If merger benefits are realizable and oil prices comply, the yield could substantially expand with consistent dividend raises over the next three years.
For 2026, the company remains focused on balancing debt reduction with shareholder returns, including dividends and share buybacks. The upcoming earnings report will be a critical test, but for long-term investors, Cenovus presents a compelling mix of growth, value, and returning cash to shareholders.
