As of May 24, 2025, Centennial Resource Development Inc's estimated intrinsic value ranges from $6.50 to $28.96 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $13.64 | +79.0% |
| Discounted Cash Flow (5Y) | $14.83 | +94.6% |
| Dividend Discount Model (Multi-Stage) | $6.50 | -14.7% |
| Dividend Discount Model (Stable) | $11.91 | +56.3% |
| Earnings Power Value | $28.96 | +280.0% |
Is Centennial Resource Development Inc (CDEV) undervalued or overvalued?
With the current market price at $7.62, the stock appears to be significantly undervalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Centennial Resource Development Inc's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 1.47 | 1.66 |
| Cost of equity | 11.5% | 15.1% |
| Cost of debt | 4.9% | 6.4% |
| Tax rate | 8.9% | 11.6% |
| Debt/Equity ratio | 0.99 | 0.99 |
| After-tax WACC | 8.0% | 10.4% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $15 | $6,270M | 61.9% |
| 10-Year Growth | $14 | $5,930M | 39.1% |
| 5-Year EBITDA | $5 | $3,351M | 28.7% |
| 10-Year EBITDA | $8 | $4,223M | 14.5% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $933M |
| Discount Rate (WACC) | 10.4% - 8.0% |
| Enterprise Value | $8,949M - $11,644M |
| Net Debt | $2,042M |
| Equity Value | $6,907M - $9,602M |
| Outstanding Shares | 285M |
| Fair Value | $24 - $34 |
| Selected Fair Value | $28.96 |
| Metric | Value |
|---|---|
| Market Capitalization | $2172M |
| Enterprise Value | $4214M |
| Trailing P/E | 4.22 |
| Forward P/E | 6.36 |
| Trailing EV/EBITDA | 2.05 |
| Current Dividend Yield | 66.41% |
| Dividend Growth Rate (5Y) | 0.00% |
| Debt-to-Equity Ratio | 0.99 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $4.09 |
| Discounted Cash Flow (5Y) | 25% | $3.71 |
| Dividend Discount Model (Multi-Stage) | 20% | $1.30 |
| Dividend Discount Model (Stable) | 15% | $1.79 |
| Earnings Power Value | 10% | $2.90 |
| Weighted Average | 100% | $13.78 |
Based on our comprehensive valuation analysis, Centennial Resource Development Inc's weighted average intrinsic value is $13.78, which is approximately 80.9% above the current market price of $7.62.
Key investment considerations:
Given these factors, we believe Centennial Resource Development Inc is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.