Independent oil and gas company Coterra Energy Inc. (CTRA - Get Rating) in Houston, Tex., develops, explores for, and produces oil, natural gas, and natural gas liquids in the United States. CTRA’s shares have gained 93.3% in price over the past year and 103.8% over the past nine months to close yesterday’s trading session at $30.93. The stock has gained 62.8% year-to-date, driven by rallying oil and gas prices amid a tight supply outlook after sanctions were imposed on Russia in response to its invasion of Ukraine.

Furthermore, with the U.S. and European Union striking a deal to ensure a steady stream of U.S. liquefied natural gas is sent to Europe to end the bloc’s dependence on Russian energy, U.S. gas producers should benefit. Indeed, the news lifted CTRA’s stock.

However, oil benchmarks declined this week on demand concerns after the International Monetary Fund (IMF) reduced its economic growth forecasts and warned of higher inflation. The organization lowered its global economic growth forecast by nearly a full percentage point, citing the Russia-Ukraine war and rising inflation.

Here is what could shape CTRA’s performance in the near term:

Stable Financials

CTRA’s operating revenues increased 387.9% year-over-year to $2.23 billion in its fiscal fourth quarter, ended Dec. 31, 2021. Its income from operations rose 660.1% from the year-ago value to $1.24 billion. The company’s adjusted net income came in at $670 million, representing a 544.2% increase year-over-year, while its adjusted EPS increased 219.2% from the prior-year quarter to $0.83.

Lofty Valuation

In terms of forward Price/Sales, CTRA is currently trading at 3.58x, which is 123.7% higher than the 1.60x industry average. Also, its 3.97 forward EV/Sales ratio is 82.4% higher than the 2.18 industry average. CTRA’s 14.82x trailing-12-month Price/Cash Flow is 105.5% higher than the 7.21x industry average.

Consensus Rating and Price Target Indicate Little Upside

Among the 10 Wall Street analysts that rated CTRA, six rated it a Buy, and four rated it a Hold. The $32.90 12-month median price target indicates a 6.4% potential upside. The price targets range from a low of $25.00 to a high of $44.00.

POWR Ratings Reflect Uncertain Prospects

CTRA has an overall rating of C, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a grade of D for Value, consistent with its lofty valuation.

CTRA also has a C grade for Sentiment, which is in sync with its limited upside potential, according to the Street analysts.

Among the 96 stocks in the B-rated Energy – Oil & Gas industry, CTRA is ranked #66.

Beyond what I have stated above, one can also view CTRA’s grades for Quality, Growth, Momentum, and Stability here.

View the top-rated stocks in the Energy – Oil & Gas industry here.

Bottom Line

Increasing oil and gas prices have favored the company’s performance so far. However, the energy market is volatile currently, with market turmoil in Europe and the IMF’s warning that inflation is now a “clear and present danger” for many countries, slashing its growth forecast. And with Wall Street analysts seeing a limited upside potential in CTRA, it currently looks less attractive than its peers. So, we think it could be wise to wait for a better entry point in the stock.

How Does Coterra Energy Inc. (CTRA) Stack Up Against its Peers?

While CTRA has an overall POWR Rating of C, one might want to consider taking a look at its industry peers, Unit Corp. (UNTC - Get Rating), Baytex Energy Corp. (BTEGF - Get Rating), and Athabasca Oil Corp. (ATHOF - Get Rating), which have an A (Strong Buy) rating.

CTRA shares rose $0.17 (+0.55%) in premarket trading Thursday. Year-to-date, CTRA has gained 66.44%, versus a -6.08% rise in the benchmark S&P 500 index during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...

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