Integrated energy giant Cenovus energy (TSX:CVE) is a friend of momentum investors right now. Up 27% in the last month of trading, Canada’s $55 billion energy stock ranks high on the oil crisis sentiment metrics. However, it is not only the positive sentiments surrounding CVE that influence investment decisions. The TSX large-cap energy stock currently appears undervalued based on a number of fundamental measures, making it a strong candidate for a long-term buy-and-hold strategy. Despite the valuation’s appeal, new investors still need to downplay one or two issues.
Should You Buy Cenovus Energy Stock at Record Highs?
Cenovus stock is doing well in February 2026, posting new 52-week highs and recently hitting C$30.15 on the TSX. The run-up to the fourth quarter 2025 earnings report, due on February 19, is promising. The company just completed a major acquisition of oil sands peer MEG Energy in a deal valued at $8.6 billion, including debt. This deal should deliver more than $400 million in synergistic benefits by 2028. Management’s commentary on the progress of the integration with MEG, especially in terms of synergies, will be an important data point for the market to digest.
An additional $400 million in cost savings trickling down to the combined company’s income statement to boost profits and cash flow is welcome. Global oil and gas prices have been complicit lately, and Bay Street analysts’ average earnings per share (EPS) for the fourth quarter of 2025 and the first quarter of 2026 are trending upward, up 26% over the past 60 days to $0.28 per share. The CVE story is good reading for traders right now.
That said, legendary investor Warren Buffett has always been skeptical of touted merger synergies during corporate takeover drives. He sees them as convenient fiction to justify overpriced takeovers. The MEG deal was concluded at a premium of 47%. Critically, we see the first signs that the expected synergies between Cenovus and MEG will materialize in 2026 and beyond. Cenovus should deliver results, and the February earnings report will provide first hints. MEG assets could grow Cenovus’ annual productivity by 15% to 20% by 2026. If the larger oil company keeps a lid on costs, the deal could add to revenues, profits and cash flow.
Is it too early to judge Cenovus on the MEG deal?
It is still too early for investors to see tangible merger benefits from the MEG transaction. The deal closed in November 2025 and the upcoming earnings will include only about six weeks of MEG’s contribution to production growth, revenue and earnings. The market may have to wait longer for definitive progress after the acquisition.
Cenovus Energy Stock Outlook for 2026
Cenovus’ current positive momentum is encouraging, but its sustainability depends on generally volatile oil prices remaining stable or rising from current levels above US$62 WTI as the company grows production and maintains recently improved refinery efficiencies in the United States.
In addition to the recent merger and the unpredictable impact of oil prices, Cenovus Energy stock has continued to face challenges related to its U.S. refinery business. Low utilization rates, in the low 90% range, have been a nagging problem for a while, but won’t see significant progress toward printing 99% utilization rates until the third quarter of 2025. Continued higher refinery production through 2026 will be reassuring news for investors. But management guidance for 2026 implies an occupancy rate of 91% to 95%, down from third-quarter results.
Encouragingly, CVE shares are trading at a price-to-earnings ratio below 24, which seems reasonable for a cash-flow-positive energy giant that could grow earnings 24% over the next five years. A forward price-to-earnings-to-growth rate (PIN) ratio of 0.8 implies that the stock may be slightly undervalued given the company’s earnings growth potential.
While a 2.8% dividend yield may not seem attractive enough for passive income purposes, Cenovus has increased dividends by double digits annually over the past three years. If the merger benefits are feasible and oil prices meet them, returns could rise substantially with consistent dividend increases over the next three years.
For 2026, the company remains focused on balancing debt reduction with shareholder returns, including dividends and share buybacks. The upcoming earnings report will be a crucial test, but for long-term investors, Cenovus offers a compelling mix of growth, value and returning cash to shareholders.
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