Event driven move in California Resources shares
California Resources (CRC) shares came under pressure after comments from U.S. and Iranian leaders pointed to possible de escalation of military tensions, easing the geopolitical risk premium that had been supporting oil prices and energy names.
See our latest analysis for California Resources.
At around US$67.71, the share price has held onto strong upward momentum, with a 30 day share price return of 4.6% and a 90 day share price return of 45.9%. The 1 year total shareholder return of 104.3% points to both price gains and income over time.
If this kind of move in an energy name has caught your attention, it may be worth widening the search and checking out 28 elite gold producer stocks
With California Resources trading around US$67.71, showing a 1 year total shareholder return above 100% and carrying an implied discount to both analyst targets and intrinsic value, investors may ask whether there is still a buying opportunity or if the market is already pricing in future growth.
Most Popular Narrative: 7% Overvalued
At $67.71, the most followed narrative’s fair value estimate of $63.31 sits a little lower, which sets up an interesting tension between model and market.
The analysts have a consensus price target of $60.75 for California Resources 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 $68.0, and the most bearish reporting a price target of just $51.0.
Want to see what is driving that gap between fair value and the current price? The narrative leans heavily on changing growth, margin and valuation multiple assumptions. Curious which of those inputs does the heavy lifting in the model?
Result: Fair Value of $63.31 (OVERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, this narrative could quickly shift if California permitting reforms stall or if CCS projects face long regulatory delays that weaken revenue visibility and cash generation.
Find out about the key risks to this California Resources narrative.
Another Way To Look At Value
The narrative flags California Resources as about 7% overvalued at $67.71 versus a fair value of $63.31, but the SWS DCF model presents a very different perspective, with an estimate of future cash flow value around $179.84, which points to a large implied undervaluation.
When two frameworks disagree this much, it raises a practical question for you as an investor: do you lean more on earnings-based assumptions or on long-term cash flow potential?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out California Resources for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 62 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
With such mixed signals around value and outlook, it helps to move quickly from headlines to hard numbers so you can pressure test the story yourself using the 1 key reward and 2 important warning signs.
Looking for more investment ideas?
If you stop with just one idea here, you could miss out on other opportunities that better fit your risk, income and quality preferences.
- Target quality at a discount by scanning companies that look mispriced on fundamentals using the 62 high quality undervalued stocks.
- Build reliable income potential into your portfolio by checking out the 13 dividend fortresses.
- Dial down portfolio risk by focusing on companies highlighted in the 68 resilient stocks with low risk scores.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com