COTERRA ENERGY INC. (CTRA): what the price requires
The current priced-in claim for COTERRA ENERGY INC. (CTRA) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.
Generated: 2026-07-19 · Source: https://boothcheck.com/report/CTRA
Headline
| Field | Value |
|---|---|
| Ticker | CTRA |
| Company | COTERRA ENERGY INC. |
| Current price | $32.56/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 4.9% |
| Operating margin today | 33.1% |
| Margin compression implied | -28.2pp |
| Multiple paid | 11x operating income |
The operating-margin requirement is derived from the framework's value band at year 9, a separately labeled basis from the headline growth/duration solve.
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
Solve inputs: computed at a 8.6% cost of capital with 4% terminal growth over a 5-year stage.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.26σ |
| cohort percentile (of 45 peers) | 20 |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.27x | 5 | expensive |
| Earnings | 0.78x | 4 | justifies |
| Relative | 0.98x | 5 | justifies |
| Growth | 0.53x | 4 | justifies |
Families that justify the price: Earnings, Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.1%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $266.40 | 0.12x | yes | FCF base $4.5B, growth 25% (input: historical growth), terminal g 4.0%, WACC 8.1%, 5yr projection |
| DCF Exit Multiple | Growth | $74.28 | 0.44x | yes | Exit EV/EBITDA: 4.0x / 5.9x / 10.9x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $29.77 | 1.09x | yes | P/E 10x (static sector reference · 2026-04), scenarios: 7.5x / 10.0x / 12.0x (bear / base = reference held flat / bull), EV/EBITDA 6x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | $31.42 | 1.04x | yes | Stage 1: 20% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $23.62 | 1.38x | yes | BV/sh $19.80, ROE (TTM) 11.0%, ke 9.3% |
| Two-Stage Excess Return | Asset | $25.71 | 1.27x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $53.17 | 0.61x | yes | Rev $8.0B, growth 30% (input: historical growth; tapered), Terminal P/S: 2.3x / 3.1x / 3.7x (bear / base = today's held flat / bull, cap 6x) |
| Peter Lynch Fair Value | Relative | $75.95 | 0.43x | yes | EPS $2.17, growth 35% (input: historical EPS growth), PEG=0.43 (Undervalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $32.22 | 1.01x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $2.65B × (1−23%) / WACC 8.1% → EPV (no growth) |
| Residual Income | Asset | $26.11 | 1.25x | yes | BV $19.80 + 5yr PV of (ROE (TTM) 11.0% − Kₑ 9.3%) × BV; BV grows 7.2%/yr |
| Graham Number | Asset | $31.09 | 1.05x | yes | √(22.5 × EPS $2.17 × BVPS $19.80) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $33.34 | 0.98x | yes | EBITDA $4.82B × sector EV/EBITDA 6.0x |
| FCF Yield | Earnings | $59.56 | 0.55x | yes | FCF $4523.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $70.02 | 0.47x | yes | EPS $2.17 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $6.57 | 4.96x | yes | BV $19.80 × (ROIC 2.7% / WACC 8.1%) |
| P/Sales Sector | Relative | $12.60 | 2.58x | yes | Revenue $8.01B × sector P/S 1.2x |
| PEG Fair Value | Relative | $81.38 | 0.40x | yes | EPS $2.17 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $23.46 | 1.39x | yes | EPS $2.17 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $3.0b |
| Net debt / NOPAT (after-tax) | 1.55x |
| Net debt / operating income (pre-tax) | 1.20x |
| Interest coverage | 12.5x |
| Share count CAGR (buyback) | -1.6% |
| Burning cash | no |
Bullet Takeaways
- Coterra is a low-cost, commodity-flexible producer splitting capital between Marcellus natural gas and Permian oil, and at $32.56 the price embeds essentially flat operating performance on a 32% operating margin and $3.6 billion of trailing free cash flow, so the methods broadly bracket rather than stretch past the price.
- The defining risk is the commodity cycle, not execution: the most recent quarter missed on both revenue, around $1.95 billion against roughly $2.25 billion expected, and earnings of $0.61 a share, because results swing with realized prices and volume mix rather than a steady operating story.
- The decisive event is corporate, not operational: Coterra's all-stock merger with Devon Energy closed on May 7, 2026, converting each Coterra share into 0.70 Devon shares, so the standalone economics here now sit inside a larger combined producer targeting $1 billion of annual synergies.
Bull Case
The counterintuitive thing about Coterra is that for an energy producer the price is not asking for much. Most of the market's attention in oil and gas goes to names priced for a commodity boom, where the buyer is implicitly betting on $90 oil. Coterra is the opposite case. At $32.56 the price embeds essentially flat operating performance, an implied growth assumption barely above zero, on a business already earning a 32% operating margin. When a producer trades where it does on flat assumptions rather than bullish ones, the upside from commodity strength is something the buyer gets for free rather than something the buyer has paid for.
That cheapness shows up across the methods rather than in one outlier. The asset-value lens, anchored on a book value of about $19 a share, supports the price with room to spare. The peer-multiple methods land right around the price, near a sector EV/EBITDA of 6 times and a sector earnings multiple near 10 times, and several of the earnings and growth methods land well above it once they credit even modest reinvestment of the company's $3.6 billion in trailing free cash flow. Coterra's advantage in the cohort is a genuinely diversified resource base: a low-cost natural-gas position in the Marcellus and oil-weighted acreage in the Permian, which lets the company tilt capital toward whichever commodity is paying best. The peer set is selling into the same fungible market, as Diamondback put it plainly, noting that "crude oil and natural gas are fungible products with well-established markets and numerous purchasers," so the edge is not the price received but the cost structure and the optionality to shift the program.
The capital discipline is the part that makes the value real rather than a trap. Coterra runs a reinvestment rate near 50% of cash flow, returns the rest to shareholders, and has been shrinking the share count about 1.2% a year while paying down debt, repaying the remaining $300 million on its term loan and ending the most recent quarter with $485 million in cash and no revolver borrowings. Net debt sits at roughly 1.6 times operating income with interest coverage around 12 times, a conservative balance sheet for the sector. The bull case is simple and unglamorous: a low-cost, commodity-flexible producer priced for nothing to improve, throwing off cash, returning it, and deleveraging, with the upside of higher prices effectively thrown in.
Bear Case
Peak earnings are not sustainable earnings, and that distinction is the whole bear case for any oil and gas producer. Coterra's 32% trailing operating margin and $3.6 billion of free cash flow are functions of where commodity prices sat over the trailing year, not of a durable competitive edge. The product is a commodity by definition, and the company says as much through its peer set: Diamondback's filing describes "crude oil and natural gas" as "fungible products with well-established markets and numerous purchasers." A fungible product means no pricing power. When the cycle turns, every producer's margin compresses together, and a name that looks cheap on trailing cash flow can look expensive on the cash flow that arrives in a downturn. The methods that anchor on current profit reflect a good year; they do not promise the next one.
The cycle position is the concrete worry. The most recent quarter already showed the squeeze: revenue came in around $1.95 billion against roughly $2.25 billion expected, and earnings of $0.61 a share missed the roughly $0.89 the market looked for, with natural-gas volumes down 6% even as oil and natural-gas liquids grew. That is the pattern of a producer whose results swing with realized prices and volume mix rather than with a steady operating story. The industry keeps adding capacity into a market that periodically oversupplies itself, and reinvestment of half of cash flow into drilling is, in a soft-price environment, capital spent to maintain production at lower returns. The asset-value support the bull leans on is itself a function of reserve valuations that move with the price deck.
The valuation gives a real but limited cushion. The book value near $19 a share and a conservative balance sheet, net debt around 1.6 times operating income with coverage near 12 times, do bound the downside better than a stretched producer's would. But the price already sits above where the static asset and earnings-power methods land on current numbers, so the cheapness is relative to a strong commodity year, not absolute. The growth methods that reach much higher do so only by assuming the recent double-digit production and earnings growth persists, which for a mature basin is an aggressive read. The bear case is not that Coterra is poorly run; it plainly is not. It is that the buyer is underwriting a commodity cycle staying favorable, and commodity cycles are the one thing a low-cost operator still cannot control.
Valuation
Coterra is the rare energy name where the price is making almost no demand of the business. At $32.56 the embedded operating-performance assumption is essentially flat, an implied growth rate barely above zero, sitting on top of a 32% trailing operating margin and $3.6 billion of trailing free cash flow. The bet the price makes is not that Coterra grows; it is that Coterra holds. For a commodity producer that is a more honest framing than a growth story, because the variable that actually moves the result is the price deck, not the company's execution.
The methods used to triangulate bracket the price rather than sitting all above or all below it, which is the signal that this is a value-and-asset-supported name rather than a premium bet. The asset-value lens, anchored on a book value near $19 a share, supports the price through its convergence and residual-income reads. The peer-multiple methods land right around the price, near a sector EV/EBITDA of 6 times and an earnings multiple near 10 times. Several of the earnings-power and growth methods land above the price once they credit reinvestment of the cash flow. The pattern is balanced: no single family is doing the heavy lifting, and the price reflects roughly what the static methods support on current numbers. The peer cohort frames the structural reality of the business. As Diamondback's filing states, "crude oil and natural gas are fungible products with well-established markets and numerous purchasers," which is why the relevant comparison among producers is cost structure and resource flexibility rather than price received, and Coterra's split between Marcellus gas and Permian oil gives it the option to point capital at whichever commodity pays.
Solvency is a genuine support here and bounds the downside. Net debt sits at about 1.6 times operating income, interest coverage runs near 12 times, and the company has been deleveraging, repaying its remaining $300 million term loan and ending the recent quarter with $485 million in cash and no revolver borrowings. The share count has fallen about 1.2% a year. A producer that returns cash, pays down debt, and shrinks its share count gives the value thesis a real floor that a more levered peer would lack. An investor at $32.56 is paying roughly what the methods support on a strong commodity year, with a conservative balance sheet underneath and the upside of higher prices essentially unpriced. The valuation is not the risk. The commodity cycle is.
Catalysts
The defining event is the Devon merger, and it has already happened. Devon Energy and Coterra agreed on February 2, 2026 to combine in an all-stock transaction valued at roughly $58 billion including debt, with each Coterra share converting into 0.70 Devon shares. Stockholders of both companies approved the deal at special meetings on May 4, 2026, and Devon completed the merger on May 7, 2026, with Devon holders owning about 54% and Coterra holders about 46% of the combined company on a fully diluted basis. Management framed the combination around $1 billion of annual pre-tax synergies expected by the end of 2027, split between capital-program optimization and operating-margin and corporate-cost savings. For a holder, the standalone Coterra thesis has effectively become a stake in the larger combined producer.
The standalone operating backdrop into the merger was mixed. First-quarter 2026 results missed expectations, with revenue near $1.95 billion against roughly $2.25 billion expected and earnings of $0.61 a share below the roughly $0.89 consensus, as natural-gas volumes fell 6% while oil rose 16% and natural-gas liquids rose 32%. Capital discipline stayed intact: the company guided to full-year capital spending around $2.25 billion with a reinvestment rate near 50%, repaid the remaining $300 million on its term loan, and ended the quarter with $485 million in cash and no revolver borrowings.
The watch items now sit at the combined-company level. Synergy capture against the $1 billion target by year-end 2027 is the cleanest measure of whether the deal delivers, and the combined capital program and production guidance will reset the trajectory that the standalone numbers no longer fully describe. Commodity prices remain the largest external variable; analysts citing higher crude raised targets into the merger, with the consensus rating holding at Buy and targets clustering in the high-$30s to low-$40s before completion. From here, the relevant security is the combined Devon-Coterra entity, and the standalone Coterra story is closed.
Peer Cohorts (Per Segment, With Filing Citations)
Oil and Natural Gas E&P (whole company) (reported)
- EOG (EOG RESOURCES, INC.)
- (no filing in the citation store)
- APA (APA Corporation)
- (no filing in the citation store)
- MGY (Magnolia Oil & Gas Corp)
- (no filing in the citation store)
- CHRD (Chord Energy Corp)
- (no filing in the citation store)
- AR (ANTERO RESOURCES CORPORATION)
- (no filing in the citation store)
- RRC (RANGE RESOURCES CORPORATION)
- (no filing in the citation store)
- PR (PERMIAN RESOURCES CORPORATION)
- (no filing in the citation store)
- SM (SM ENERGY CO)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Q1 2026 results, 2026 · merger completion announcement, May 2026 · merger agreement, February 2026 · analyst coverage, 2026