Insider buying puts CVR Energy (CVI) back in focus
Carl Icahn affiliated entities recently put US$16.4 million into additional CVR Energy (CVI) shares, lifting their position above 71.2 million shares, even as the company works through a suspended dividend and a preliminary quarterly net loss.
See our latest analysis for CVR Energy.
CVR Energy’s recent 1 day share price return of 5.7% and 7 day share price return of 14.5% have come after a tougher 90 day period. At the same time, the 1 year total shareholder return of 46.0% and 5 year total shareholder return of 120.3% point to momentum that has built over a longer horizon.
If insider buying at CVR Energy has caught your attention and you are curious about where else the market sees potential, it could be a good time to scan 24 power grid technology and infrastructure stocks as another way to spot infrastructure related opportunities.
With CVR Energy trading around US$26.45, sitting at a discount to the average analyst price target and showing a large gap to some intrinsic value estimates, you have to ask yourself whether this is a genuine entry point or whether the market is already pricing in future growth.
Most Popular Narrative: 4.4% Undervalued
At a last close of $26.45 versus a narrative fair value of about $27.67, CVR Energy’s story hinges on how well it can execute its operational and capital plans under a 7.38% discount rate.
The analysts have a consensus price target of $23.5 for CVR Energy based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $27.0, and the most bearish reporting a price target of just $19.0.
Curious why a higher fair value still sits above a lower consensus target? The popular narrative focuses on revenue shifts, margin rebuild and a richer future earnings multiple. Want to see which specific growth, profitability and valuation assumptions have been combined to support that outcome? The full storyline lays out the numbers in black and white.
Result: Fair Value of $27.67 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, you also need to weigh the recent quarterly net loss of US$105 million and regulatory uncertainty around RFS and RIN costs, which could challenge the bullish storyline.
Find out about the key risks to this CVR Energy narrative.
Another angle on CVR Energy’s valuation
The earlier fair value of about $27.67 paints CVR Energy as modestly undervalued, but the P/E ratio tells a very different story. At 98.5x earnings versus 14.7x for the US Oil and Gas industry, a 19.1x peer average and a 20.2x fair ratio, the shares screen as expensive. If sentiment cools, could that gap narrow faster than fundamentals change?
See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
If this combination of insider buying, fair value gaps and a lofty P/E has you undecided, take a closer look now and weigh the trade off between potential upside and risk for yourself with 3 key rewards and 2 important warning signs.
Looking for more investment ideas?
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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