Built-in power large Cenovus Vitality (TSX:CVE) is presently a momentum investor’s good friend. Up 27% through the previous buying and selling month, the $55 billion Canadian power inventory ranks excessive on sentiment metrics within the oil patch. Nevertheless, it isn’t solely the optimistic vibes on CVE which are influencing funding choices. The large-cap TSX power inventory seems undervalued on some elementary metrics immediately, making it a robust candidate for a long-term buy-and-hold technique. Regardless of the valuation enchantment, new buyers nonetheless must downplay one or two points.
Must you purchase Cenovus Vitality inventory at all-time highs?
Cenovus inventory is having an excellent run in February 2026. It’s printing new 52-week highs, lately hitting C$30.15 on the TSX. The run-up to its fourth-quarter 2025 earnings report due on February 19 is filled with promise. The corporate has simply closed a significant acquisition of oil sands peer MEG Vitality in an $8.6 billion deal, debt included. This deal is meant to unlock over $400 million in synergistic advantages by 2028. Administration’s commentary on how integration with MEG is progressing, particularly on the synergies entrance, might be a significant knowledge level for the market to digest.
An additional $400 million in price financial savings trickling right down to the mixed firm’s earnings assertion to spice up earnings and money circulation is welcome. International oil and fuel costs have been complicit currently, and Bay Road analysts’ common earnings per share (EPS) estimate for the fourth quarter of 2025 and the primary quarter of 2026 have been trending larger, up 26% through the previous 60 days to $0.28 per share. CVE’s story is an effective learn for merchants proper now.
That mentioned, legendary investor Warren Buffett has at all times been famously skeptical of touted merger synergies throughout company acquisition actions. He views them as handy fiction to justify overpriced acquisitions. The MEG deal closed at a 47% premium. It’s essential that we see early indicators of the anticipated synergies between Cenovus and MEG materializing in 2026 and past. Cenovus should ship, and the February earnings report will give early hints. MEG property might develop Cenovus’s annual productiveness by 15% to twenty% in 2026. If the bigger oil firm accommodates prices, the deal might be accretive to income, earnings, and money circulation.
Is it too early to evaluate Cenovus on the MEG deal?
It’s nonetheless too early for buyers to see tangible merger advantages from the MEG transaction. The deal closed in November 2025, and the upcoming earnings will solely embody about six weeks of MEG’s contribution to manufacturing development, income, and earnings. The market could have to attend longer for definitive progress post-acquisition.
Outlook for Cenovus Vitality inventory for 2026
Cenovus inventory’s present optimistic momentum is encouraging, however its sustainability is dependent upon often unstable oil costs remaining steady or rising from present ranges above US$62 WTI, whereas the corporate grows manufacturing and sustains its lately improved refinery effectivity in the US.
Past the latest merger and the unpredictable affect of oil costs, Cenovus Vitality inventory has had perennial challenges relating to U.S. refinery operations. Low utilization charges, within the low 90% ranges, have been a nagging downside for a while, solely to indicate important progress through the third quarter of 2025 to print a 99% utilization charge. Sustained larger refinery throughput in 2026 might be reassuring information for buyers. However administration steering for 2026 implies utilization charges of 91% to 95%, a dip from third quarter achievements.
Encouragingly, CVE inventory trades at a ahead P/E below 24, which seems affordable for a money circulation optimistic power large that would develop earnings by 24% over the subsequent 5 years. A ahead price-earnings-to-growth (PEG) ratio of 0.8 implies shares might be barely undervalued given the corporate’s earnings development potential.
Whereas a dividend yield of two.8% doesn’t appear enticing sufficient for passive earnings functions, Cenovus has raised dividends at double-digit annual charges through the previous three years. If merger advantages are realizable and oil costs comply, the yield might considerably broaden with constant dividend raises over the subsequent three years.
For 2026, the corporate stays targeted on balancing debt discount with shareholder returns, together with dividends and share buybacks. The upcoming earnings report might be a essential check, however for long-term buyers, Cenovus presents a compelling mixture of development, worth, and returning money to shareholders.