VERMILION ENERGY INC. (VET): what the price requires
At today's price, VERMILION ENERGY INC. (VET) is priced for +17.9% 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: 2026-07-19 · Exported: 2026-07-20 · Source: https://boothcheck.com/report/VET
Headline
| Field | Value |
|---|---|
| Ticker | VET |
| Company | VERMILION ENERGY INC. |
| Sector / Industry | Energy |
| Current price | $9.82/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 | 3.1% |
| Operating margin (mid-cycle) | 8.9% |
| Margin compression implied | -5.8pp |
| Trailing margin (depressed year) | -30.3% |
| Implied growth | 17.9% |
| Multiple paid | 21x mid-cycle operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9.2% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.1pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.76σ |
| sustained it ~5 years at this level | 46% |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and earnings-power and relative-multiple value, while growth-DCF lands below the price. 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 | 0.98x | 2 | justifies |
| Earnings | 0.20x | 1 | justifies |
| Relative | 0.97x | 2 | justifies |
| Growth | 2.22x | 3 | expensive |
Families that justify the price: Asset, Earnings, Relative Families that call it expensive: Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.3%); the inversion above states its own rate.
Per-Model Detail (n=8)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $48.98 | 0.20x | yes | FCF base $0.7B, growth 3% (input: historical growth), terminal g 3.4%, WACC 9.3%, 5yr projection |
| DCF Exit Multiple | Growth | $0.00 | — | no | Negative/zero FCF or EBITDA — equity value floored at $0 |
| Relative Valuation | Relative | $10.12 | 0.97x | yes | P/S fallback (negative EPS): Sector P/S 1.2x × TTM revenue — excluded from consensus |
| Simple DDM | Growth | $0.64 | 15.34x | yes | DPS $0.35, g=-29.4% (sustainable: ROE (TTM) × retention; not the terminal-growth assumption), ke=9.3% |
| Two-Stage DDM | Growth | $-4.31 | — | no | Stage 1: -200% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $10.62 | 0.92x | yes | Reference only (book value floor): BV/sh $10.62, ROE negative |
| Two-Stage Excess Return | Asset | $9.56 | 1.03x | yes | Reference only (book value with convergence): BV/sh $10.62, ROE converges to ke |
| Discounted Future Market Cap | Growth | $4.42 | 2.22x | yes | Rev $1.3B, growth 3% (input: historical growth; tapered), Terminal P/S: 0.9x / 1.2x / 1.4x (bear / base = today's held flat / bull, cap 6x) |
| Peter Lynch Fair Value | Relative | $0.00 | — | no | Negative/zero EPS — earnings-based value floored at $0 |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | — | — | no | — |
| Graham Number | Asset | — | — | no | — |
| EV/EBITDA Relative | Relative | — | — | no | — |
| FCF Yield | Earnings | $50.09 | 0.20x | yes | FCF $711.6M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | — | — | no | — |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $10.12 | 0.97x | yes | Revenue $1.30B × sector P/S 1.2x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | — | — | no | — |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $863.0m |
| Net debt / NOPAT (after-tax) | 9.88x |
| Net debt / operating income (pre-tax) | 7.80x |
| Interest coverage | 1.2x |
| Share count CAGR (buyback) | -1.2% |
| Burning cash | no |
Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 8.9%); the trailing year was depressed.
Bullet Takeaways
- Vermilion is an international gas producer whose distinguishing feature is direct European exposure: Q1 2026 output averaged 125,618 barrels of oil equivalent a day, roughly 72 percent gas, split across Canadian gas, European gas priced off premium hubs, and liquids.
- The risk is leverage on a cyclical business: interest is covered only about 1.2 times, and net debt sits close to eight times mid-cycle operating income, so a downswing in gas prices squeezes both cash flow and the capacity to carry that debt.
- The next print lands in early August 2026; debt has fallen by roughly 770 million Canadian dollars over the past year, the dividend was raised 4 percent for a fifth straight year, and European gas prices remain the swing factor.
Bull Case
Read Vermilion as what it is: a cyclical energy producer near the low point of its cycle, which changes how the numbers should be read. Trailing operating income is deeply negative, near 377 million dollars in the red, dragged there by soft gas prices and writedowns rather than by a broken business. Judge a cyclical on that trailing figure and you conclude the company loses money as a matter of course. Judge it on the earnings it makes across a full cycle and the picture inverts. On mid-cycle economics the operating margin runs near 8.9 percent, and the assets throw off real cash: the first quarter alone generated 232 million Canadian dollars of fund flows and 98 million Canadian dollars of free cash flow, with controllable costs cut 25 percent from a year earlier.
The differentiator is geography. Most North American gas producers sell into Henry Hub and AECO, some of the cheapest gas on earth; Vermilion sells a meaningful slice of its production into European hubs, where the price the quarter averaged sat many times above North American benchmarks. That European window is the reason the company can fund a growing dividend and pay down debt in a period when pure North American peers are struggling. It is also why the balance sheet is mending: net debt has come down by roughly 770 million Canadian dollars over the last twelve months, the company agreed in March 2026 to sell its remaining Croatian stake to speed that further, and it is expanding its German gas position where the netbacks are richest.
What makes the value case is where the price sits against the methods. Value Vermilion on its assets and the methods land right around today's price; value it on its normalized earnings power and they land well above it. Only the growth-based cash-flow method sits below the price, which is the tell: the market is not paying a growth premium here. The share count has edged down about 1.2 percent a year as the company buys back stock, the dividend has risen for five consecutive years, and the debt is falling. Buy the asset base near cost, get paid to wait, and let a deleveraging balance sheet do the rest: that is the bull case, and it does not require the commodity to spike.
Bear Case
Every energy producer earns whatever the commodity gives it, and that is the first problem with Vermilion at this price. An exploration-and-production company does not set the price of its output; gas and oil markets do, and this is a business whose recent free cash flow rode a European gas window that can close as fast as it opened. Price the company off a strong quarter and you are extrapolating peak conditions into a trough-prone business. European gas is the most volatile major gas market in the world, capable of trading at a large premium one year and collapsing the next, and roughly half of Vermilion's European volumes are unhedged beyond the current book. The earnings that make the stock look cheap are not the earnings it will necessarily keep.
Leverage turns that volatility into an existential variable rather than an inconvenience. Net debt sits close to eight times mid-cycle operating income, and interest is covered only about 1.2 times, which is thin for a company whose cash flow swings with the gas price. In a strong price environment the debt falls and the story is deleveraging; in a weak one the same debt load consumes the cash flow that would otherwise fund the dividend, the buyback, and the drilling needed just to hold production flat. Producing wells decline every year, so a chunk of the capital budget buys no growth at all, only standing still. When prices fall, the choice narrows to cutting the payout, cutting the capital that arrests decline, or letting the debt ratio climb.
The price is not asking for nothing, either. To support today's level the business has to lift its operating margin to about 3.3 percent from the deeply negative trailing figure near negative 30 percent, and then compound company-wide operating profit at roughly 19.8 percent a year over a five-year stage. That is within what Vermilion has managed in good stretches, but history is unkind to the duration: only about 43 percent of comparable fast-growers sustained that pace for even five years. The bet is not that Vermilion recovers off the trough, which it plausibly does, but that a levered, price-taking producer holds an above-average recovery together long enough, through a commodity cycle it does not control, to earn the price.
Valuation
At $9.82 (July 19, 2026) the market is paying about 21 times Vermilion's mid-cycle operating income, and inverting that price is more useful than any single fair value. Because the trailing year is a cyclical trough, the honest read normalizes through the cycle rather than off the trough quarter, and on that basis the price embeds a specific recovery: an operating margin climbing to about 3.3 percent from the deeply negative trailing figure near negative 30 percent, and company-wide operating profit compounding at roughly 19.8 percent a year over a five-year stage. That recovery is within what the company has delivered before; the question the price raises is not the rate but how long it must hold.
The way the methods disagree is the argument for the value case. The asset-based methods land right around today's price, and the earnings power lens, run on normalized profit, lands well above it. Peer multiples sit near the price as well. Only the growth-based cash-flow method comes in below the price, sitting about 2.2 times under it. Read together, that pattern says the price is supported by what the company owns and what it earns through a cycle, not by a growth premium the market is extrapolating. For a cyclical trading around the value of its asset base, that is the more comfortable end of the risk spectrum, provided the balance sheet survives to see the recovery.
Which is where the caution lives. This is not a net-cash company with a cushion; net debt runs close to eight times mid-cycle operating income and interest is covered only about 1.2 times, so the downside is governed by the debt, not by the assets. The mitigant is direction: management has been paying the debt down, the share count has edged lower by about 1.2 percent a year, and the dividend has kept rising. The value the methods point to is real, but it is levered value, and the gap between a comfortable outcome and a painful one is set less by Vermilion's rock than by the price of the gas that comes out of it.
Catalysts
Vermilion's first-quarter 2026 results, reported May 6, were the operational high point of the recent run: production of 125,618 barrels of oil equivalent a day beat the top of guidance, fund flows reached 232 million Canadian dollars, free cash flow was 98 million Canadian dollars, and net debt fell again, down roughly 770 million Canadian dollars over the trailing year. The board raised the quarterly dividend to 0.135 Canadian dollars per share, a 4 percent increase and the fifth consecutive annual raise. The next print lands in early August 2026, and the figures to watch are the debt trajectory and European gas realizations.
The strategic moves all point the same way: toward European gas and away from debt. Vermilion expanded its German position and is progressing the Wisselshorst development, while agreeing in March 2026 to divest its remaining 60 percent stake in Croatia's SA-07 block to accelerate debt reduction. For 2026 the company guides to full-year production around 119,500 barrels of oil equivalent a day, and it has hedged a large share of the coming year to protect cash flow, with roughly half of European gas, most crude, and about half of North American gas covered.
The external read is neutral rather than enthusiastic. The most recent analyst position on the Toronto listing is a Hold with a price target of 19.00 Canadian dollars, a level that sits above the current US-listed share price once the currency is accounted for, crediting the deleveraging and the European window while withholding judgment on the durability of the gas price that drives both.
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
Vermilion Q1 2026 results, May 2026 · Vermilion May 2026 investor presentation · TipRanks analyst summary, 2026