Coterra Energy’s Strong Reserves and Rising Cash Flow Prompt Revaluation in 2025

Thinking about what to do with Coterra Energy stock? You are not alone. Investors have been watching closely this year, especially as energy markets shift and headlines swirl about supply, sustainability, and shifting demand. If you are trying to decide whether to hold, buy more, or move on, it is worth pausing to examine what is really driving this stock right now.

Let us start with what the numbers are telling us. After an early-year slide, Coterra’s performance has been steadier than it looks at first glance. Shares are up just 0.4% in the past week and 0.9% over the last month, and while the year-to-date return shows a dip of almost 11%, the past year’s return is slightly positive at 1.8%. Zoom out to five years, and it is a different story altogether. The stock has surged more than 65%. These moves come as the company continues to navigate an evolving energy landscape, including fluctuations in natural gas prices and shifting policy sentiments about domestic energy production.

Recent news has highlighted the company’s strong reserves position and several new gas well completions, reflecting its ongoing investment in production capacity. This supports market confidence, not just in Coterra’s current income, but in its future potential to capitalize on changing energy dynamics as the industry recalibrates for the long term.

Now, the real question: Is Coterra Energy undervalued, overvalued, or sitting just right? Here is the compelling part. According to our model, Coterra scores a perfect 6 out of 6 on key valuation checks used to spot undervalued opportunities. In the sections ahead, I will break down what each of those valuation approaches reveals, along with one overlooked method that might be the most telling of all.

Coterra Energy delivered 1.8% returns over the last year. See how this stacks up to the rest of the Oil and Gas industry.

Approach 1: Coterra Energy Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) valuation model estimates a company's true worth by projecting its future cash flows and discounting them to reflect today's value. This approach is well suited to energy companies like Coterra Energy, where cash flows can fluctuate with commodity cycles but provide long-term clarity on value.

For Coterra Energy, current Free Cash Flow stands at approximately $1.50 Billion. Looking forward, analysts predict substantial growth, with projections reaching $2.70 Billion in 2029. Beyond the five-year mark, these forecasts are further extended by extrapolations, offering a more complete long-term picture.

Based on these cash flow projections and the 2 Stage Free Cash Flow to Equity method, the model estimates Coterra's fair value at $77.52 per share. With the intrinsic discount showing the stock is trading at about 69.9% below this estimated value, the current share price appears significantly undervalued compared to the company’s projected performance and cash generation potential.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Coterra Energy is undervalued by 69.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Coterra Energy Price vs Earnings

The Price-to-Earnings (PE) ratio is the go-to metric for evaluating profitable companies like Coterra Energy because it directly compares the market's valuation of a business with its actual earnings. A lower PE can suggest a stock is undervalued, while a higher PE typically reflects strong growth expectations or lower perceived risk. Risk and growth potential both play major roles in what is considered a reasonable PE ratio. Fast-growing or very stable companies can often justify a higher PE, while those with more uncertainty should trade lower.

Coterra Energy’s current PE ratio is 11.28x. This sits comfortably below the Oil and Gas industry average of 12.90x and is much lower than the peer group average of 40.33x. While peer and industry comparisons can be useful, they are often limited, as they miss company-specific differences in growth, profitability, and risk profile.

This is where Simply Wall St’s “Fair Ratio” comes in. The Fair Ratio, at 18.36x in Coterra’s case, reflects the multiple that would be justified given the company’s unique mix of growth prospects, profit margins, risk levels, industry, and size. It aims to provide a more individualized benchmark than just a simple average. Because Coterra’s actual PE ratio (11.28x) is well below its Fair Ratio, the shares look undervalued on this measure.

Result: UNDERVALUED

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

Upgrade Your Decision Making: Choose your Coterra Energy Narrative

Earlier we mentioned there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is your personalized investment story: the perspective you assign to a company that goes beyond the numbers, combining your assumptions for future revenue, earnings, and profit margins into a structured forecast and linking it directly to a fair value.

With Narratives, you can connect your outlook for Coterra Energy’s business, such as its LNG projects, cost controls, or regulatory risks, with your estimates of what the company should be worth today. This transforms investing from just reading charts and ratios to having an explicit, evidence-backed view that is easy to create, compare, and revisit over time. Best of all, Simply Wall St's Community page makes building and following Narratives accessible and supports millions of investors. As new news or results are released, your Narrative updates automatically to reflect the latest data.

Narratives empower you to act more confidently by comparing your fair value to the latest price, helping you make buy, sell, or hold decisions with greater clarity. For example, some investors currently see Coterra’s fair value as high as $40.00, betting on strong LNG-driven profit growth, while others see it closer to $25.55, reflecting more caution about gas prices and risks. Narratives let you decide which outlook matches your own, using transparent financial assumptions to build your investment case.

Do you think there's more to the story for Coterra Energy? Create your own Narrative to let the Community know!

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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