What a fantastic six months it’s been for Crescent Energy. Shares of the company have skyrocketed 42.4%, hitting $12.64. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is it too late to buy CRGY? Find out in our full research report, it’s free.
Why Are We Positive On CRGY?
Controlling over 1.4 million net acres across proven U.S. basins, Crescent Energy (NYSE: CRGY) extracts oil and natural gas from underground reservoirs in Texas and the Rocky Mountains.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term performance can give signals about its business quality. Even a bad business, especially in a cyclical industry, can shine for a year or so, but a top-tier one should exhibit resilience through cycles. Over the last five years, Crescent Energy grew its sales at an incredible 41.5% compounded annual growth rate. Its growth beat the average energy upstream and integrated energy company and shows its offerings resonate with customers.
2. Elite Gross Margin Powers Best-In-Class Business Model
In any given year, energy gross margins are heavily influenced by prices, hedging, and cost inflation, but over a full cycle these gross margins reveal which producers are structurally advantaged through superior “rock” quality, infrastructure access, and cost position.
Crescent Energy, which averaged 59% gross margin over the last five years, exhibits good unit economics in the sector. It means the company will remain profitable at lower commodity prices than peers with inferior gross margins and serves as an encouraging starting point for ultimate operating profits and free cash flow generation.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Crescent Energy has shown robust cash profitability, driven by its attractive business model that enables it to reinvest or return capital to investors. The company’s free cash flow margin averaged 14.8% over the last five years, quite impressive for an upstream and integrated energy business.
Final Judgment
These are just a few reasons Crescent Energy is a high-quality business worth owning, and after the recent rally, the stock trades at 4.9× forward P/E (or $12.64 per share). Is now the time to buy despite the apparent froth? See for yourself in our in-depth research report, it’s free.
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