Is Canadian Natural Resources Still Attractive After Its Big Multi Year Share Price Run?

• If you are wondering whether Canadian Natural Resources is still a smart buy after its big multi year run, or if the easy money has already been made, you are not alone. This breakdown is designed to help you stack the odds in your favor.
• The stock has cooled off recently, with shares down 7.9% over the last week and 8.6% over the last month. It is modestly negative year to date, even after delivering 3.5% over 1 year, 35.8% over 3 years, and 271.9% over 5 years.
• Recent moves in the share price sit against a backdrop of ongoing capital discipline, stronger balance sheet positioning, and a continued focus on shareholder returns through dividends and buybacks. All of these factors can influence how the market prices the stock over time. At the same time, shifting expectations for global oil demand, supply constraints, and long term energy transition policies are keeping investors on their toes as they reassess what a fair multiple for a major Canadian producer should look like.
• Right now, Canadian Natural Resources scores a perfect 6/6 valuation check score. In the next sections we will unpack what different valuation methods say about the stock, then finish with a more nuanced way to think about its true worth beyond the usual models.

Find out why Canadian Natural Resources's 3.5% return over the last year is lagging behind its peers.

Approach 1: Canadian Natural Resources Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth by projecting the cash it can generate in the future and discounting those cash flows back to today using a required rate of return.

For Canadian Natural Resources, the model starts with last twelve month Free Cash Flow of about CA$8.9 billion and then builds a two stage Free Cash Flow to Equity profile. Analyst estimates cover the next few years, with Free Cash Flow expected to grow to roughly CA$12.1 billion by 2029. Beyond that, Simply Wall St extrapolates cash flows out to 2035 using gradually slowing growth rates, then discounts this 10 year stream back to today.

On this basis, the DCF model estimates an intrinsic value of roughly CA$167.52 per share. Compared with the current market price, this implies the stock is trading at about a 74.3% discount to its calculated fair value. This suggests the market is assigning a much lower value to Canadian Natural Resources future cash generation than the model does.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Canadian Natural Resources is undervalued by 74.3%. Track this in your watchlist or portfolio, or discover 909 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Canadian Natural Resources.

Approach 2: Canadian Natural Resources Price vs Earnings

For profitable companies like Canadian Natural Resources, the price to earnings ratio is a useful shorthand for how much investors are willing to pay today for each dollar of current earnings. It naturally reflects expectations for future growth and the risk investors see in those earnings, with faster growing or safer companies typically commanding higher PE ratios.

Canadian Natural Resources currently trades on a PE of about 13.46x. That sits slightly below both the broader Oil and Gas industry average of around 14.25x and the peer group average of roughly 14.42x, suggesting the market is applying a small discount to the stock relative to its sector.

Simply Wall St also calculates a Fair Ratio, which is the PE multiple you might expect given the company’s specific earnings growth outlook, profitability, size and risk profile. For Canadian Natural Resources, this Fair Ratio is 18.23x. This means the shares trade materially below the level implied by these fundamentals. Because the Fair Ratio is tailored to the company instead of relying only on blunt peer or industry comparisons, it can provide a more nuanced view of value and indicates the stock may be undervalued on an earnings basis.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1463 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Canadian Natural Resources Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of Canadian Natural Resources business to a numbers based forecast and a fair value estimate that you can actually act on. A Narrative is the story you believe about a company, translated into assumptions for future revenue, earnings and margins, and then into a fair value that you can compare against the current share price to decide whether it looks like a buy, a hold, or a sell. On Simply Wall St, millions of investors share these Narratives on the Community page, and they update dynamically as new information like earnings releases, guidance changes, or major news hits the market. For example, one Canadian Natural Resources Narrative might lean bullish, assuming that resilient oil prices, expanding infrastructure and disciplined capital returns justify a fair value near CA$62 per share. A more cautious Narrative could focus on oil sands risk, regulatory pressure and long term energy transition headwinds and land closer to CA$45, giving you a clear, side by side view of how different stories produce different valuations.

Do you think there's more to the story for Canadian Natural Resources? Head over to our Community to see what others are saying!

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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