Canadian Natural Resources (TSX:CNQ) is catching the eye of value investors after its recent acquisition. And yet, it still seems like the stock is on sale. Following the acquisition of Chevron's Alberta oil sands assets, including a 20% interest in the Athabasca Oil Sands Project (AOSP), CNQ has positioned itself for significant growth in production and free cash flow. This deal adds long-life, low-decline synthetic crude oil production and increases CNQ's working interest in AOSP to 90%. And yet, the stock still trades at a relatively attractive price-to-earnings (P/E) ratio of around 13.4.

Rewarding investors

After the Chevron acquisition, CNQ didn't stop at asset growth. It rewarded its shareholders by increasing its dividend by 7%, continuing its 25-year streak of dividend growth. This kind of dividend reliability is what long-term investors love, especially since CNQ's new assets are expected to generate immediate free cash flow. The company's dividend now stands at an impressive 4.3% forward yield, solidifying it as a top pick for income-focused investors.

While the stock has risen following the news, CNQ's valuation still suggests that it could be undervalued. The forward P/E of 13.4 remains well within a reasonable range, especially when considering the company's fundamentals. CNQ boasts a return on equity (ROE) of 19.7%, which reflects efficient management and profitable operations. Moreover, the company's price-to-book ratio of 2.6 points to a potential discount compared to its peers, especially given its long-life assets and operational expertise in oil sands.

Onto earnings

Looking deeper into earnings, CNQ stock has been delivering steady quarterly growth, with a 17.2% increase in earnings year over year. Its operating margin of 28.3% and profit margin of 20.9% are strong indicators of the company's ability to manage costs while maintaining solid profitability. With assets like the newly acquired Duvernay play, which is set to ramp up production, CNQ's earnings outlook is increasingly favourable.

Free cash flow is another key component of CNQ stock's value. The company generated $15.3 billion in operating cash flow over the last year and $8.9 billion in levered free cash flow. This positions CNQ to maintain its dividend policy and further reduce debt. This is already manageable with a debt-to-equity ratio of 29.6%. As net debt decreases, more of CNQ stock's free cash flow will go to shareholders, enhancing returns through both dividends and potential buybacks.

Bottom line

Fundamentally, CNQ stock appears to be priced attractively relative to its growth prospects. With the acquisition of Chevron's assets, increased dividend payouts, and a solid earnings trajectory, CNQ looks poised for sustained performance. For investors seeking value in the energy sector, CNQ offers both growth potential and stability. Thus, its current price tag seems like a bargain.

So while CNQ's stock has seen a bump from its recent asset purchase, its fundamentals suggest that the stock remains undervalued. Considering its long history of dividend growth, increasing cash flow, and strong earnings outlook, CNQ stock looks like a solid pick for investors who want a mix of growth and income in their portfolio.