With attacks picking back up in the Middle East, oil prices have once again surged above US$100 per barrel as disruptions to global oil supplies continue. As a result, investors are unsurprisingly paying even more attention to massive Canadian energy stocks like Cenovus Energy (TSX: CVE), and for good reason.
After starting the year around $23, Cenovus has gained almost 100% so far in 2026, currently trading around $46 per share. So, it’s natural to wonder after a rally like that if most of the stock’s upside is already behind it.
And while higher oil prices are helping Cenovus generate more cash today, three years is too long to base an investment thesis solely on where oil is trading now.
That’s why the more important question is how much Cenovus can grow its earnings per share through the MEG acquisition, higher production and continued share repurchases, and whether that gives it more upside than its energy-sector peers.
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Cenovus’s integrated operations and MEG acquisition
Cenovus is a compelling long-term investment for many Canadians because it produces both oil and natural gas as well as owning upgrading and refining assets.
This doesn’t eliminate its exposure to oil prices, but it gives Cenovus more ways to generate cash flow than producers that rely almost entirely on upstream production.
Furthermore, its recent acquisition of MEG significantly expanded Cenovus’s production and created opportunities to lower costs.
In the second quarter, Cenovus achieved record oil sands production and generated nearly $5 billion in adjusted funds flow. And while elevated commodity prices helped, higher production and strong operating performance did too.
Management also expects the MEG acquisition to generate roughly $150 million in annual synergies in 2026 and 2027 before those savings increase to more than $400 million beginning in 2028.
Meanwhile, Cenovus reduced net debt by $2.7 billion to $5.4 billion in the second quarter while spending roughly $1 billion repurchasing shares.
That’s important because now that its net debt is between $4 billion and $6 billion, Cenovus plans to return roughly 75% of its excess free funds flow to shareholders over time.
The company is also advancing several growth projects as it works toward sustaining production of roughly one million barrels of oil equivalent per day.
Therefore, higher production, lower costs, and a declining share count can continue creating value for shareholders long after the current boost from the war in Iran fades.
Where could Cenovus stock be in three years?
Predicting where Cenovus stock will be in three years can be incredibly tricky because it relies on a lot of assumptions. However, we can still estimate the approximate range based on its expected growth potential and historical valuation metrics.
And for an energy producer like Cenovus, enterprise value (EV)-to-earnings before interest, taxes, depreciation and amortization (EBITDA) is often the best metric to use.
And right now, according to analyst estimates, Cenovus is expected to generate EBITDA of roughly $18.6 billion in 2026, $15.7 billion in 2027, and $15.1 billion in 2028.
That decline shows just how much the war in Iran is boosting Cenovus’s EBITDA expectations in 2026.
However, while its earnings potential will eventually decline as oil prices normalize, continued synergies from its MEG acquisition, as well as production growth and falling costs, could make normalized EBITDA of roughly $16 billion in 2029 achievable.
Over the last five years, the stock has averaged a forward EV-to-EBITDA ratio of 4.7 times, and today it trades at just under 5 times its forward EBITDA.
That’s why, even with Cenovus shares trading around $46 and up nearly 100% on the year, I wouldn’t expect to see the stock trading much lower three years from now, especially when you factor in continued debt reduction and share repurchases.
So while it’s difficult to pinpoint exactly where the stock could trade, it doesn’t look significantly overvalued today.
The war in Iran could also have longer-lasting impacts because, even if it ended tomorrow, damage to energy infrastructure and key shipping routes wouldn’t disappear overnight, potentially keeping oil prices elevated for longer.
So, if you’re looking for an energy stock to buy and hold for years and are worried about Cenovus’s valuation, it’s certainly not cheap, but long-term investors can still make the case for buying it today.
