Is Cenovus Still a Smart Bet After Recent Oil Price Surge in 2025?

If you are trying to figure out whether Cenovus Energy is a smart addition to your portfolio, you are not alone. This stock has caught the eye of plenty of investors, and for good reason. After all, Cenovus has delivered some eye-popping returns over the past five years, climbing more than 460.3%. Even in the shorter term, there is momentum: shares are up 2.5% in the last week, 2.4% over the past month, and an impressive 10.0% year-to-date.

Why all the movement? While the oil sector has been volatile, recent optimism around energy demand and ongoing discussions about supply constraints have played in Cenovus’ favor. Investors seem to be recalibrating their perception of risk and growth potential here, especially as the global push for reliable energy sources continues.

The question now is whether this rally has left the stock undervalued, fairly priced, or perhaps even a bit too hot. According to our valuation checks, Cenovus Energy scores a 3 out of 6 on our value scale, indicating it meets half of the criteria for being considered undervalued. This places the stock in a middle ground that warrants a closer look.

Let’s break down exactly how these valuation methods stack up. Keep in mind, we will also explore a smarter way to judge what the numbers mean for you before wrapping up.

Why Cenovus Energy is lagging behind its peers

Approach 1: Cenovus Energy Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a foundational valuation method for long-term investors. It estimates a company's intrinsic value by projecting its future free cash flows and discounting them back to today's value. This approach provides a grounded view of whether the stock is trading above or below its true worth.

For Cenovus Energy, the current Free Cash Flow stands at approximately CA$3.77 Billion. Analysts provide cash flow estimates for the next five years, with projections continuing through 2035 via extrapolation. Notably, Free Cash Flow is expected to grow steadily, reaching nearly CA$6.8 Billion in 2035, based on these forecasts.

Applying the 2-Stage Free Cash Flow to Equity model, the estimated intrinsic fair value for Cenovus Energy is CA$83.23 per share. Compared to its present price, this suggests the stock is trading at a significant discount of about 70.9% to intrinsic value.

In simple terms, the DCF analysis points to substantial upside for the patient investor, assuming cash flows materialize as projected and external factors do not disrupt growth assumptions.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Cenovus Energy.

Story Continues

CVE Discounted Cash Flow as at Oct 2025

Our Discounted Cash Flow (DCF) analysis suggests Cenovus Energy is undervalued by 70.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Cenovus Energy Price vs Earnings

The Price-to-Earnings (PE) ratio is a popular metric when valuing profitable companies like Cenovus Energy. It captures how much investors are paying today for each dollar of earnings, making it useful for comparing companies in similar industries with steady profitability.

Typically, a fair PE ratio depends heavily on investor expectations for future growth and perceived risk. If a company is expected to grow earnings rapidly or faces lower business risks, a higher PE can be justified. The reverse is true for slower growth or elevated risk, which generally warrant a lower PE multiple.

Cenovus Energy currently trades at a PE ratio of 16.48x. To put this in context, this figure is higher than the average for the Oil and Gas industry, which is 11.85x, but close to the average of its peer group at 15.39x. These comparisons suggest Cenovus commands a modest premium in the market, possibly reflecting better growth or stability expectations.

However, relying solely on industry averages can miss company-specific dynamics. Simply Wall St’s proprietary “Fair Ratio” factors in additional elements such as Cenovus’s earnings growth outlook, profit margins, market capitalization, risks, and its place within the industry. This tailored approach gives a more precise sense of valuation than generic peer or industry benchmarks could provide.

For Cenovus, the Fair Ratio stands at 17.18x, just marginally above its current 16.48x PE. This close alignment suggests the stock is priced about right given its fundamentals and outlook.

Result: ABOUT RIGHTTSX:CVE PE Ratio as at Oct 2025

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Cenovus Energy Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply your story, the perspective behind your numbers, summarizing how you expect a company’s revenue, earnings, profit margins, and risks to develop, and how that leads to your view of its fair value.

Narratives link the “why” of the company’s journey to specific forecasts and then to a fair value, making your investment view both personal and actionable. On Simply Wall St’s platform, Narratives are easy to create and update within the Community page, allowing millions of investors to compare perspectives, share insights, and meaningfully interpret every new piece of information.

This tool empowers you to decide when to buy or sell by directly comparing fair value to price. Because Narratives are dynamic, they automatically update as news breaks or earnings are released, keeping your assumptions relevant and tied to reality.

For example, some investors are bullish on Cenovus Energy, setting fair values as high as CA$32.00 with optimistic assumptions about production projects and earnings growth. Others take a more conservative view with fair values closer to CA$21.00, reflecting regulatory, environmental, or market risks.

Do you think there's more to the story for Cenovus Energy? Create your own Narrative to let the Community know!TSX:CVE Community Fair Values as at Oct 2025

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include CVE.TO.

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