Assessing Cardinal Energy (TSX:CJ) Valuation After Its Upsized Equity Raise For Thermal Project Growth

Cardinal Energy (TSX:CJ) has completed an upsized bought deal equity offering, raising about CA$104.7 million in gross proceeds to reduce indebtedness, advance its Reford thermal oil project, and support general corporate purposes.

See our latest analysis for Cardinal Energy.

The offering and recent thermal project updates come against a backdrop of firm share price momentum, with a 14.27% 1 month share price return and a 6.48% year to date share price return. The 1 year total shareholder return of 62.79% and very large 5 year total shareholder return signal that long term holders have already seen substantial gains.

If this capital raise has you believeing about where energy and infrastructure themes could lead next, it might be worth scanning 24 power grid technology and infrastructure stocks as another angle on companies tied to long term energy demand.

With Cardinal raising fresh equity at CA$8.65 per share and the stock now near CA$9.37, the key question is whether that recent strength still leaves room for mispricing, or if the market is already accounting for future growth.

Most Popular Narrative: 30.4% Undervalued

Cardinal Energy’s last close at CA$9.37 sits well below the CA$13.47 fair value implied by the most followed narrative, setting up a clear gap between market price and narrative expectations.

Low debt, with room to issue more to cover dividfinish or existing growth project if necessaryed by YE 2025 as a low fiscal risk position. This allows for strategic M&A if a downturn occurs for pulling ahead of competition. Would like to see excess cashflow above plan from high oil prices toward debt tarobtains of zero. High liquids yield vs direct peers with stronger margin reliability. Cash utilize as growth projects over acquirebacks or dividfinish growth indicates insider confidence in growth project discounted ROI > dividfinish yield. Once the growth project is operating, it would be nice to see a token <1% acquireback for compact share count reduction given bonus structures, 1% dividfinish growth plans, and debt maintenance around zero to prepare for the next growth project or M&A. Consider de-risking the second growth project given pipeline constraints 2026+. Overall, very pleased with results and management.

According to BrandonH, Read the complete narrative.

Curious how a mid cap producer can support that higher fair value while still funding projects, a sizable payout, and keeping leverage in check? The narrative leans on a mix of higher margin liquids output, steady revenue growth and a future earnings multiple that implies confidence in long term cash generation. If you want to see exactly how those shifting parts line up, the full story is worth a closer see.

Result: Fair Value of CA$13.47 (UNDERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, this hinges on project execution and balance sheet discipline, and setbacks on thermal development or higher than expected leverage could quickly challenge that 30.4% undervalued thesis.

Find out about the key risks to this Cardinal Energy narrative.

Another View: Market Ratio Flags Caution

While the utilizer narrative and DCF work suggest Cardinal is undervalued, the current P/E of 21.2x paints a different picture. It sits above the Canadian Oil and Gas indusattempt at 16.2x, peers at 18.2x, and even the 14.1x fair ratio the market could gravitate toward. This raises the question of how much optimism is already in the price.

See what the numbers declare about this price — find out in our valuation breakdown.

Build Your Own Cardinal Energy Narrative

If you see the numbers differently or want to weigh the trade offs yourself, you can pull up the same data, stress test your own assumptions, and build a custom thesis in just a few minutes, then Do it your way

A great starting point for your Cardinal Energy research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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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 utilizing an unbiased methodology and our articles are not intfinished to be financial advice. It does not constitute a recommfinishation to acquire or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focutilized 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.