MEG Energy (TSX:MEG) - Share price, News & Analysis

Q: What is the Fair Price of MEG when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

MEG (CA$19.23) is trading below our estimate of [[fair value]] (CA$33.56)

MEG fundamental analysis
Snowflake Score
Valuation	4/6
Future Growth	0/6
Past Performance	3/6
Financial Health	4/6
Dividends	0/6

MEG Stock Overview

MEG Energy Corp., an energy company, focuses on sustainable in situ thermal oil production in the southern Athabasca oil region of Alberta, Canada.

Rewards

Trading at 42.7% below our estimate of its fair value

Became profitable this year

Risk Analysis

Earnings are forecast to decline by an average of 13.6% per year for the next 3 years

Has a high level of debt

Significant insider selling over the past 3 months

MEG Energy Competitors

PrairieSky Royalty

TSX:PSK

CA$4.0b

Crescent Point Energy

TSX:CPG

CA$5.8b

Whitecap Resources

TSX:WCP

CA$6.0b

Paramount Resources

TSX:POU

CA$4.4b

Price History & Performance

Summary of all time highs, changes and price drops for MEG Energy
Historical stock prices
Current Share Price	CA$19.23
52 Week High	CA$24.47
52 Week Low	CA$6.85
Beta	3.15
1 Month Change	-12.43%
3 Month Change	8.58%
1 Year Change	120.53%
3 Year Change	289.27%
5 Year Change	404.72%
Change since IPO	-45.07%

Recent News & Updates

Jun 04

Is MEG Energy (TSE:MEG) Using Too Much Debt?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says...

Shareholder Returns

	MEG	CA Oil and Gas	CA Market
7D	-8.2%	0.2%	-0.4%
1Y	120.5%	41.2%	-2.9%

Return vs Industry: MEG exceeded the Canadian Oil and Gas industry which returned 38.1% over the past year.

Return vs Market: MEG exceeded the Canadian Market which returned -2.6% over the past year.

Price Volatility

Is MEG's price volatile compared to industry and market?
MEG volatility
MEG Average Weekly Movement	9.3%
Oil and Gas Industry Average Movement	10.4%
Market Average Movement	10.1%
10% most volatile stocks in CA Market	17.3%
10% least volatile stocks in CA Market	4.4%

Stable Share Price: MEG is not significantly more volatile than the rest of Canadian stocks over the past 3 months, typically moving +/- 9% a week.

Volatility Over Time: MEG's weekly volatility (9%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1999	413	Derek Evans	https://www.megenergy.com

MEG Energy Corp., an energy company, focuses on sustainable in situ thermal oil production in the southern Athabasca oil region of Alberta, Canada. The company owns a 100% interest in approximately 410 square miles of mineral leases. It also develops oil recovery projects that utilize steam-assisted gravity drainage extraction methods to improve the recovery of oil, as well as lower carbon emissions.

MEG Energy Fundamentals Summary

How do MEG Energy's earnings and revenue compare to its market cap?
MEG fundamental statistics
Market Cap	CA$5.99b
Earnings (TTM)	CA$662.00m
Revenue (TTM)	CA$4.94b

9.0x

P/E Ratio

1.2x

P/S Ratio

Is MEG overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
MEG income statement (TTM)
Revenue	CA$4.94b
Cost of Revenue	CA$2.77b
Gross Profit	CA$2.17b
Other Expenses	CA$1.51b
Earnings	CA$662.00m

Last Reported Earnings

Mar 31, 2022

Next Earnings Date

n/a

Earnings per share (EPS)	2.13
Gross Margin	43.99%
Net Profit Margin	13.41%
Debt/Equity Ratio	58.4%

How did MEG perform over the long term?

See historical performance and comparison

We’ve recently updated our valuation analysis.

Valuation

Is MEG undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

4/6

Valuation Score 4/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for MEG?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for MEG. This is calculated by dividing MEG's market cap by their current preferred multiple.
What is MEG's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	CA$5.99b

MEG key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	1.7x
Enterprise Value/EBITDA	5.4x
PEG Ratio	-0.7x

Price to Earnings Ratio vs Peers

How does MEG's PE Ratio compare to its peers?

MEG PE Ratio vs Peers

The above table shows the PE ratio for MEG vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	10.5x
PSK PrairieSky Royalty	23.9x	n/a	CA$4.0b
CPG Crescent Point Energy	1.6x	-63.0%	CA$5.8b
WCP Whitecap Resources	2.5x	n/a	CA$6.0b
POU Paramount Resources	13.8x	n/a	CA$4.4b
MEG MEG Energy	9x	-13.6%	CA$6.0b

Forward PE

Price-To-Earnings vs Peers: MEG is good value based on its Price-To-Earnings Ratio (9x) compared to the peer average (10.5x).

Price to Earnings Ratio vs Industry

How does MEG's PE Ratio compare vs other companies in the CA Oil and Gas Industry?

Price-To-Earnings vs Industry: MEG is expensive based on its Price-To-Earnings Ratio (9x) compared to the Canadian Oil and Gas industry average (8x)

Price to Earnings Ratio vs Fair Ratio

What is MEG's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

MEG PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	9x
Fair PE Ratio	10.3x

Price-To-Earnings vs Fair Ratio: MEG is good value based on its Price-To-Earnings Ratio (9x) compared to the estimated Fair Price-To-Earnings Ratio (10.3x).

Share Price vs Fair Value

What is the Fair Price of MEG when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: MEG (CA$19.23) is trading below our estimate of fair value (CA$33.56)

Significantly Below Fair Value: MEG is trading below fair value by more than 20%.

Price to Earnings Growth Ratio

PEG Ratio: MEG's earnings are forecast to decline next year, so we can't calculate its PEG ratio.

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Future Growth

How is MEG Energy forecast to perform in the next 1 to 3 years based on estimates from 3 analysts?

Future Growth Score

0/6

Future Growth Score 0/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

-13.6%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: MEG's earnings are forecast to decline over the next 3 years (-13.6% per year).

Earnings vs Market: MEG's earnings are forecast to decline over the next 3 years (-13.6% per year).

High Growth Earnings: MEG's earnings are forecast to decline over the next 3 years.

Revenue vs Market: MEG's revenue is expected to decline over the next 3 years (-1.8% per year).

High Growth Revenue: MEG's revenue is forecast to decline over the next 3 years (-1.8% per year).

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: Insufficient data to determine if MEG's Return on Equity is forecast to be high in 3 years time

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Past Performance

How has MEG Energy performed over the past 5 years?

Past Performance Score

3/6

Past Performance Score 3/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

26.7%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: MEG has high quality earnings.

Growing Profit Margin: MEG became profitable in the past.

Past Earnings Growth Analysis

Earnings Trend: MEG has become profitable over the past 5 years, growing earnings by 26.7% per year.

Accelerating Growth: MEG has become profitable in the last year, making the earnings growth rate difficult to compare to its 5-year average.

Earnings vs Industry: MEG has become profitable in the last year, making it difficult to compare its past year earnings growth to the Oil and Gas industry (171.2%).

Return on Equity

High ROE: MEG's Return on Equity (15.8%) is considered low.

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Financial Health

How is MEG Energy's financial position?

Financial Health Score

4/6

Financial Health Score 4/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: MEG's short term assets (CA$1.3B) exceed its short term liabilities (CA$806.0M).

Long Term Liabilities: MEG's short term assets (CA$1.3B) do not cover its long term liabilities (CA$2.7B).

Debt to Equity History and Analysis

Debt Level: MEG's net debt to equity ratio (51%) is considered high.

Reducing Debt: MEG's debt to equity ratio has reduced from 131% to 58.4% over the past 5 years.

Debt Coverage: MEG's debt is well covered by operating cash flow (40.8%).

Interest Coverage: MEG's interest payments on its debt are well covered by EBIT (4.9x coverage).

Balance Sheet

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Dividend

What is MEG Energy current dividend yield, its reliability and sustainability?

Dividend Score

0/6

Dividend Score 0/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

0.74%

Forecast Dividend Yield

Dividend Yield vs Market

Notable Dividend: Unable to evaluate MEG's dividend yield against the bottom 25% of dividend payers, as the company has not reported any recent payouts.

High Dividend: Unable to evaluate MEG's dividend yield against the top 25% of dividend payers, as the company has not reported any recent payouts.

Stability and Growth of Payments

Stable Dividend: Insufficient data to determine if MEG's dividends per share have been stable in the past.

Growing Dividend: Insufficient data to determine if MEG's dividend payments have been increasing.

Earnings Payout to Shareholders

Earnings Coverage: Insufficient data to calculate payout ratio to determine if its dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: Unable to calculate sustainability of dividends as MEG has not reported any payouts.

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Management

How experienced are the management team and are they aligned to shareholders interests?

2.4yrs

Average management tenure

CEO

Derek Evans (64 yo)

3.83yrs

Tenure

CA$4,402,975

Compensation

Mr. Derek W. Evans, B.Sc, has been the President and Chief Executive Officer at MEG Energy Corporation since August 10, 2018. Mr. Evans has been an Independent Director of Franco-Nevada Corporation since A...

CEO Compensation Analysis

Compensation vs Market: Derek's total compensation ($USD3.42M) is about average for companies of similar size in the Canadian market ($USD3.57M).

Compensation vs Earnings: Derek's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: MEG's management team is considered experienced (2.4 years average tenure).

Board Members

Experienced Board: MEG's board of directors are considered experienced (3.8 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: MEG insiders have sold more shares than they have bought in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/06/28 00:00
End of Day Share Price	2022/06/28 00:00
Earnings	2022/03/31
Annual Earnings	2021/12/31