Is It Too Late To Consider Baytex Energy (TSX:BTE) After Its 40% One Year Gain?
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If you are wondering whether Baytex Energy is still good value after its recent run, this article will walk through what the current price could mean for you as a shareholder or potential investor.
The stock closed at C$4.75, with a 1.9% decline over the last 7 days, a 1.1% gain over 30 days, a 4.6% gain year to date, a 40.0% gain over 1 year, and a very large 5 year return that is around 5x.
Recent coverage around Baytex Energy has focused on its position as a Canadian energy producer in a sector where commodity prices and capital discipline are key themes. This helps frame how investors think about its share price swings. Sector wide discussions on balance sheet strength, reinvestment choices, and shareholder returns all feed into how the market is currently pricing Baytex and its peers.
Our valuation model gives Baytex Energy a score of 2 out of 6, which suggests some checks flag potential undervaluation. Next we will walk through the different valuation approaches that lead to this score and then look at a more complete way to think about value by the end of the article.
Baytex Energy scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
The Dividend Discount Model estimates what a share could be worth by projecting future dividends and discounting them back to today. It is particularly focused on how sustainable and repeatable those dividends might be over time.
For Baytex Energy, the model uses a current dividend per share of CA$0.090335, a return on equity of 7.9035%, and a payout ratio of 2.5678. The dividend growth rate for the model is capped at 2.87%, taken from a higher underlying growth estimate of 7.700553927%, to keep the assumptions more restrained. These inputs feed into a long term dividend projection that is then discounted back to a present value per share.
The DDM output gives an intrinsic value of about CA$2.67 per share, compared with the recent share price of CA$4.75. That gap implies the shares screen as around 77.9% above this dividend-only framework. For dividend focused investors, this model suggests Baytex is priced well above what its current dividend profile supports.
For a profitable company like Baytex Energy, the P/E ratio is a useful shorthand because it links what you pay today with the earnings the business is currently generating. Investors usually accept a higher P/E when they expect stronger growth or see lower risk, and a lower P/E when growth expectations are more modest or risks feel higher.
Baytex trades on a P/E of 17.0x, which is close to the Oil and Gas industry average of about 17.3x and below the peer group average of 28.4x. Simply Wall St also calculates a Fair Ratio of 5.29x for Baytex, which is the P/E level that their model suggests would be more aligned with its earnings growth profile, industry, profit margins, market cap and risk factors.
This Fair Ratio is more tailored than a simple comparison with industry or peer averages because it adjusts for company specific drivers rather than assuming all producers should trade at similar levels. Comparing Baytex’s current 17.0x P/E to the 5.29x Fair Ratio suggests the shares are trading well above what this framework views as a more balanced level.
Earlier we mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you turn your view of Baytex Energy into a clear story that links your expectations for future revenue, earnings and margins to a financial forecast, a Fair Value, and a simple comparison with today’s price. All of this is available in an easy tool on the Community page that updates when fresh news or earnings arrive. One investor might build a Baytex Narrative close to the highest analyst target of CA$5.50 if they focus on buybacks and the Eagle Ford sale, while another might sit nearer the lowest CA$2.50 target if they are more concerned about tariffs, oil price volatility and the high future P/E of 344.21x.
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.
Companies discussed in this article include BTE.TO.
