DEVON ENERGY CORP/DE (DVN): what the price requires
At today's price, DEVON ENERGY CORP/DE (DVN) is priced for +3.5% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-17 · Source: https://boothcheck.com/report/DVN
Headline
| Field | Value |
|---|---|
| Ticker | DVN |
| Company | DEVON ENERGY CORP/DE |
| Current price | $43.62/sh |
| Composition | Oil, gas and NGL sales 67% / Marketing and midstream revenues 33% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Implied growth | 3.5% |
| Multiple paid | 12x operating income |
Solve inputs: computed at a 10% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~5.3pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.44σ |
| cohort percentile (of 45 peers) | 24 |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and earnings-power 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 | 0.93x | 4 | justifies |
| Earnings | 1.14x | 3 | expensive |
| Relative | 1.32x | 3 | expensive |
| Growth | 0.92x | 3 | justifies |
Families that justify the price: Asset, Earnings, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.0%); the inversion above states its own rate.
Per-Model Detail (n=13)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $86.35 | 0.51x | yes | FCF base $2.9B, growth 3% (input: historical growth), terminal g 2.6%, WACC 7.0%, 5yr projection |
| DCF Exit Multiple | Growth | $47.63 | 0.92x | yes | Exit EV/EBITDA: 4.7x / 9.7x / 14.7x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $33.12 | 1.32x | yes | P/E 10x (static sector reference · 2026-04), scenarios: 7.5x / 10.0x / 12.0x (bear / base = reference held flat / bull), EV/EBITDA 7.12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $39.67 | 1.10x | yes | BV/sh $24.96, ROE (TTM) 14.7%, ke 9.3% |
| Two-Stage Excess Return | Asset | $49.44 | 0.88x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $28.24 | 1.54x | yes | Rev $17.1B, growth 3% (input: historical growth; tapered), Terminal P/S: 1.2x / 1.6x / 1.9x (bear / base = today's held flat / bull, cap 6x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | $50.84 | 0.86x | yes | BV $24.96 + 5yr PV of (ROE (TTM) 14.7% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $44.91 | 0.97x | yes | √(22.5 × EPS $3.59 × BVPS $24.96) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $22.04 | 1.98x | yes | EBITDA $3.59B × sector EV/EBITDA 6.0x |
| FCF Yield | Earnings | $38.42 | 1.14x | yes | FCF $2927.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $3.01 | 14.49x | yes | EPS $3.59 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $33.29 | 1.31x | yes | Revenue $17.15B × sector P/S 1.2x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $38.81 | 1.12x | yes | EPS $3.59 / 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 |
|---|---|
| Share count CAGR (buyback) | -1.6% |
| Burning cash | no |
Operating profit is negative or near zero and the company has no demonstrated through-cycle (mid-cycle) operating margin to normalize against, so years-to-repay cannot be computed honestly.
Operating profit is negative or near zero and there is no demonstrated through-cycle (mid-cycle) operating margin to normalize against, so interest coverage cannot be computed honestly.
Bullet Takeaways
Devon's case runs on free cash flow and capital returns: Q1 2026 generated $816 million of free cash flow with capex 6% below guidance, funding a dividend increase of more than 30% and a planned resumption of buybacks above the legacy level after the merger.
The Coterra merger closed May 7, 2026, creating a large-cap Delaware Basin shale operator (Devon holders own about 54%, Coterra holders 46%) with $1 billion of annual pre-tax synergies targeted by year-end 2027, the dominant near-term driver and integration risk.
Bull Case
The single most decisive number for Devon is free cash flow, because it is what the entire investment case converts into. In Q1 2026 the company generated $816 million of free cash flow from $1.7 billion of operating cash flow against $848 million of capital spending, with capex coming in 6% below the midpoint of guidance. That is the signature of a disciplined shale operator: pump at the high end of production guidance (oil at 387 thousand barrels per day, 833,000 barrels of oil equivalent per day in total) while holding capital spending below plan, and let the difference fall to cash. Core earnings were $1.04 per share even as reported net earnings of $0.19 were depressed by a non-cash commodity derivative valuation loss of about $701 million, a paper item, not a cash one.
That cash funds the second leg, the capital return, which is the reason to own a mature E&P. Management announced a per-share dividend increase of more than 30% beginning in the second quarter, and committed to resuming and increasing share repurchases above the legacy level after the merger close. Devon's history is one of returning cash directly to owners, with operating cash flow funding both reinvestment and buybacks [DVN FY2025 10-K, accession 0001193125-26-056485].
The transformational leg is the Coterra merger, which closed on May 7, 2026, creating a premier large-cap shale operator anchored in the economic core of the Delaware Basin. Devon shareholders own about 54% of the combined company, which keeps the Devon name and ticker, and management has identified $1 billion in annual pre-tax synergies targeted by year-end 2027. A larger, lower-cost, Delaware-Basin-weighted Devon with $1 billion of synergies and an enhanced return program is a stronger cash machine than the standalone company.
Bear Case
The qualitative truth a Devon holder has to sit with is that the stock looks cheap because it is a commodity producer, and commodity cheapness is conditional, not structural. Devon's revenue is roughly two-thirds oil, gas, and NGL sales and one-third marketing and midstream, so the bulk of the profit rides directly on commodity prices the company does not control. When oil falls, the same operating leverage that makes the cash flow look abundant works in reverse, and the discount the bulls see today can evaporate without the price moving an inch.
The earnings volatility is already visible in the reported numbers. Q1 2026 net earnings fell to $120 million, or $0.19 per share, dragged down by a $701 million non-cash derivative loss, and full-year 2025 net earnings of $2.7 billion were below the $2.9 billion of 2024 [DVN FY2025 10-K, accession 0001193125-26-056485]. The hedging that smooths cash flow also introduces large mark-to-market swings, and the headline earnings are noisy quarter to quarter, which makes any single-period valuation read unreliable.
The merger adds integration risk on top of the commodity risk. The Coterra combination, closed May 7, is an all-stock deal in which Coterra holders received 0.70 Devon shares each and now own about 46% of the company, so existing Devon holders were diluted to roughly 54% ownership. The $1 billion of targeted synergies is a promise stretching to year-end 2027, and large E&P mergers do not always deliver promised synergies on schedule; asset integration, cultural fit, and capital-allocation discipline across a bigger footprint are real execution risks. Net debt of roughly $7.9 billion (before the merged balance sheet is fully reflected) is a fixed claim that a downturn in oil prices makes heavier. The bear case is straightforward: this is a well-run, low-cost producer, but it is still a price-taker in a cyclical commodity, freshly enlarged by a merger that has yet to prove its synergies, and the apparent cheapness is a bet on oil prices and integration both cooperating.
Valuation
Devon is a value-and-asset-supported name where the apparent cheapness comes with a commodity asterisk. At $42.13 the inversion prices the business at roughly 10 times operating income and reads the priced-in assumption as essentially flat operating growth (about -0.4%), classified as within range. The asset, earnings-power, and growth-DCF families all support the price, the profile of a value name rather than a growth bet.
The caution is what sits underneath those methods: trailing operating income. For an exploration-and-production company, trailing earnings are a function of where oil and gas prices happened to be, so a fair-value base far above the price typically signals a producer near a comfortable point in the commodity cycle rather than a durable bargain. The same methods that show $92 of value would show far less if priced off mid-cycle or trough commodity assumptions. The 17.7% current operating margin is healthy but cyclical, and the reported earnings volatility (a $701 million non-cash derivative swing in a single quarter) underscores how unstable the inputs are.
The practical read is that Devon is reasonably priced to cheap if oil and gas prices hold near current levels, the merger synergies land, and the enhanced capital-return program delivers. The free cash flow is real (about $816 million in Q1), the dividend is rising more than 30%, and the Delaware Basin asset base is among the best in U.S. shale. But the buyer is underwriting a commodity-price assumption embedded in trailing earnings, plus the integration of the Coterra combination. The valuation rewards a constructive oil environment and clean integration, and the discount narrows quickly if commodity prices roll over.
Catalysts
The transformational catalyst was the completion of the Coterra merger on May 7, 2026, after shareholders of both companies approved it on May 4 with overwhelming majorities. The all-stock deal converted each Coterra share into 0.70 Devon shares, leaving Devon shareholders with about 54% of the combined company, which retains the Devon name and the DVN ticker. The combination creates a premier large-cap shale operator anchored in the core of the Delaware Basin, with $1 billion in annual pre-tax synergies targeted by year-end 2027. Realization of those synergies and a smooth integration are the key milestones for the next 18 months.
The most recent standalone operating update was Q1 2026. Devon reported net earnings of $120 million, or $0.19 per diluted share, depressed by a non-cash commodity derivative valuation loss of about $701 million; core earnings were $641 million, or $1.04 per share. Oil production reached 387 thousand barrels per day at the high end of guidance, total production was 833,000 barrels of oil equivalent per day, capital spending came in 6% below the midpoint, and free cash flow was $816 million. Both companies paused buybacks between merger announcement and close, with plans to resume and increase repurchases post-close, and the dividend is set to rise more than 30% per share starting in the second quarter, subject to board approval.
The overarching catalyst remains commodity prices. As a producer with roughly two-thirds of revenue tied to oil, gas, and NGL sales, Devon's cash flow and the durability of its valuation hinge on the oil and gas price environment. Production volumes, capital discipline, the pace of synergy capture, and the cadence of the resumed buyback are the items to track quarter to quarter, all against the backdrop of where commodity prices settle.
Sources: https://investors.devonenergy.com/investors/press-releases/press-release-details/2026/Devon-Energy-and-Coterra-Energy-Complete-Merger/ , https://www.stocktitan.net/news/DVN/devon-energy-and-coterra-energy-complete-txm2td8fgqwl.html , https://www.stocktitan.net/sec-filings/DVN/8-k-devon-energy-corp-de-reports-material-event-83d73ca7e6e6.html , https://www.investing.com/news/company-news/devon-energy-q1-2026-slides-coterra-deal-set-as-revenue-concerns-linger-93CH-4680014
Peer Cohorts (Per Segment, With Filing Citations)
U.S. Oil & Gas (single reportable segment) (reported)
- OVV (Ovintiv Inc.)
- (no filing in the citation store)
- OXY (OCCIDENTAL PETROLEUM CORPORATION)
- (no filing in the citation store)
- EOG (EOG RESOURCES, INC.)
- (no filing in the citation store)
- APA (APA Corporation)
- (no filing in the citation store)
- CTRA (COTERRA ENERGY INC.)
- (no filing in the citation store)
- CHRD (Chord Energy Corp)
- (no filing in the citation store)
- CRC (California Resources Corp)
- (no filing in the citation store)
- FANG (Diamondback Energy, Inc.)
- (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.