We recently published a list of the 10 Most Undervalued Canadian Stocks to Buy According to Wall Street Analysts. In this article, we are going to take a look at where Cenovus Energy Inc. (NYSE:CVE) stands against other undervalued Canadian stocks according to Wall Street analysts.
As February was concluding, Reuters reported that Canada’s economy showed unexpected strength in Q4 2024, with an annualized growth rate of 2.6%. Household spending in particular, which makes up over half of the total GDP, rose by 1.4% in Q4. Business investments, which were stagnant for the past 11 quarters, finally showed positive momentum with a 0.7% growth in Q4. This was fueled by a 4.2% surge in investment in machinery and equipment. On a per capita basis, real GDP rose by 0.2% in Q4, which represents the second increase in the last 11 quarters. However, recently, amidst concerns over a US-led trade war, a Reuters poll from April indicates rising recession risks for Canada, which will potentially trigger at least two more Bank of Canada rate cuts this year, despite a temporary 90-day pause on some reciprocal tariffs announced by the US. Economists have now lowered Canada’s growth forecasts to 1.2% for this year and 1.1% for the next, down from 1.7% and 1.6% respectively. All the economists surveyed agree that the US tariffs have negatively affected business sentiment. Inflation is projected to average 2.4% in 2025 and 2.1% in 2026.
On April 7, Steve Odland, The Conference Board president and CEO, joined CNBC’s Special Report to talk about the impact of tariff-led uncertainty on CEO sentiments. Steve Odland emphasized that CEOs need clarity on numbers, costs, and the rules of the game to plan effectively. While CEOs felt somewhat positive about the general direction of the economy, the introduction of tariffs had thrown everything into confusion. Odland described the situation as chaotic because many had expected tariffs to target countries like China, not close allies such as Canada and Mexico. This move was a shock to the system and raised questions about whether the tariffs were a temporary negotiating tactic or a long-term policy change, which further complicates business planning.
In a conversation regarding the expectation of certain countries to come to the negotiating table, Odland responded that some countries, including Canada and Mexico, would likely be prioritized for quick resolution due to their importance. This is because of the integrated nature of the North American supply chain, especially in industries like automotive manufacturing. The conversation suggested that if firm deals could be reached with Canada, Mexico, China, Vietnam, and Taiwan, ideally resulting in zero tariffs, business confidence would improve.
Our Methodology
We first used the Finviz stock screener to compile a list of cheap Canadian stocks that had a forward P/E ratio under 15. We then selected the 10 stocks with high upside potential of over 35%. The stocks are ranked in ascending order of their upside potential. We have also added the hedge fund sentiment for each stock, as of Q4 2024, which was sourced from Insider Monkey’s database.
Note: All data was sourced on April 21.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A fleet of oil tankers at sea, representing the global reach of a crude oil supplier.
Cenovus Energy Inc. (NYSE:CVE)
Forward P/E Ratio as of April 21: 11.57
Number of Hedge Fund Holders: 39
Average Upside Potential as of April 21: 51.75%
Cenovus Energy Inc. (NYSE:CVE) develops, produces, refines, transports, and markets crude oil, natural gas, and refined petroleum products. It develops and produces bitumen and heavy oil in northern Alberta and Saskatchewan. Its oil sand assets include Foster Creek, Christina Lake, and Sunrise projects, as well as Lloydminster thermal and conventional heavy oil assets.
The company’s Oil Sands segment contributes to its overall upstream performance. In 2024, the Oil Sands segment achieved a record production of 610,700 BOE per day, which was an increase of ~3% year-over-year. This was fueled by increased production at the Sunrise project and new annual production records at the Foster Creek and Lloydminster thermal assets within this segment. Notably, in Q4 2024, the Oil Sands segment reached a new quarterly production record of 629,000 BOE per day.
Cenovus Energy Inc. (NYSE:CVE) now anticipates continued growth from its Oil Sands assets. The company completed a major turnaround at Christina Lake in Q3 2024. The Foster Creek optimization project, which was 64% complete at the end of 2024 with first oil expected in early 2026 and full ramp-up in 2027, will also contribute to increased production from this segment.
L1 Long Short Fund stated the following regarding Cenovus Energy Inc. (NYSE:CVE) in its first quarter 2024 investor letter:
“Cenovus Energy Inc. (NYSE:CVE) (Long +20%) shares performed strongly as the WTI oil price increased 16% to ~US$83/bbl, while refining margins in the U.S. Midwest improved dramatically from a low base. During March, Cenovus’s 2024 investor day was well received, where its 5-year outlook for the business included growth in upstream production of around 150m bbl/d above the current 800m bbl/d and a material turnaround of its downstream refining business. Over the next five years, the company expects to generate C$32b of cumulative free cash flow based on a US$75/bbl WTI oil price, a highly attractive prospect given its current market cap of ~C$51b. Furthermore, it has committed to return 100% of excess cash flow back to investors once it reaches its C$4b net debt target (expected in 2024). Cenovus’s strong cash flow generation, combined with the long-life nature of its oil sands assets and its low cost of production, make it one of our preferred Energy exposures.”
Overall, CVE ranks 5th on our list of the most undervalued Canadian stocks to buy according to Wall Street analysts. While we acknowledge the growth potential of CVE, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than CVE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.