Is Now The Time To Put Cenovus Energy (TSE:CVE) On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Cenovus Energy (TSE:CVE). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Cenovus Energy

How Fast Is Cenovus Energy Growing Its Earnings Per Share?

Over the last three years, Cenovus Energy has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. To the delight of shareholders, Cenovus Energy's EPS soared from CA$2.02 to CA$2.58, over the last year. That's a impressive gain of 28%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. This approach makes Cenovus Energy look pretty good, on balance; although revenue is flattish, EBIT margins improved from 9.4% to 12% in the last year. That's something to smile about.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Cenovus Energy?

Are Cenovus Energy Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Even though some insiders sold down their holdings, their actions speak louder than words with CA$355k more invested than sold by people who know they company best. This overall confidence in the company at current the valuation signals their optimism. We also note that it was the President, Jonathan McKenzie, who made the biggest single acquisition, paying CA$2.2m for shares at about CA$22.25 each.

On top of the insider buying, it's good to see that Cenovus Energy insiders have a valuable investment in the business. Given insiders own a significant chunk of shares, currently valued at CA$89m, they have plenty of motivation to push the business to succeed. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because on our analysis the CEO, Jon McKenzie, is paid less than the median for similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Cenovus Energy, with market caps over CA$11b, is about CA$11m.

Cenovus Energy's CEO took home a total compensation package worth CA$8.7m in the year leading up to December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does Cenovus Energy Deserve A Spot On Your Watchlist?

You can't deny that Cenovus Energy has grown its earnings per share at a very impressive rate. That's attractive. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. Astute investors will want to keep this stock on watch. You still need to take note of risks, for example - Cenovus Energy has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Cenovus Energy, you'll probably love this curated collection of companies in CA that have an attractive valuation alongside insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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.