Marathon Petroleum Corp (MPC, Financial) has recently experienced a daily gain of 2.46% and a 3-month gain of 36.23%. With an Earnings Per Share (EPS) of 27.56, the question arises: Is the stock modestly overvalued? This article provides a comprehensive valuation analysis of Marathon Petroleum. We encourage you to read on to gain valuable insights.
Company Introduction
Marathon Petroleum is an independent refiner with 13 refineries across the midcontinent, West Coast, and Gulf Coast of the United States. The company has a total throughput capacity of 2.9 million barrels per day. Its Dickinson, North Dakota, facility produces 184 million gallons a year of renewable diesel. Furthermore, its Martinez, California, facility will have the capacity to produce 730 million gallons a year of renewable diesel once converted. The firm also owns and operates midstream assets primarily through its listed master limited partnership, MPLX.
At a current price of $148.85 per share, Marathon Petroleum has a market cap of $59.50 billion. The company's GF Value, an estimation of fair value, stands at $134.13, suggesting the stock could be modestly overvalued.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Marathon Petroleum's current price suggests that the stock is modestly overvalued. As a result, the long-term return of its stock is likely to be lower than its business growth.
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Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss for investors. To avoid this, it's crucial to research and review a company's financial strength before purchasing shares. Marathon Petroleum's cash-to-debt ratio of 0.4 ranks worse than 57.05% of companies in the Oil & Gas industry. However, the overall financial strength of Marathon Petroleum is 7 out of 10, indicating fair financial health.
Profitability and Growth
Consistent profitability over the long term offers less risk for investors. Marathon Petroleum has been profitable 9 out of the past 10 years. Over the past twelve months, the company had a revenue of $156.80 billion and an Earnings Per Share (EPS) of $27.56. Its operating margin is 10.44%, ranking better than 52.84% of companies in the Oil & Gas industry. Overall, the profitability of Marathon Petroleum is ranked 7 out of 10, indicating fair profitability.
One of the most important factors in the valuation of a company is growth. The average annual revenue growth of Marathon Petroleum is 27.1%, which ranks better than 80.3% of companies in the Oil & Gas industry. The 3-year average EBITDA growth is 60.9%, ranking better than 88.01% of companies in the same industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) is another way to assess its profitability. For the past 12 months, Marathon Petroleum's ROIC is 21.62, and its cost of capital is 7.88, suggesting a favorable profitability scenario.
Conclusion
In summary, Marathon Petroleum's stock appears to be modestly overvalued. The company exhibits fair financial condition and profitability. Its growth ranks better than 88.01% of companies in the Oil & Gas industry. To learn more about Marathon Petroleum stock, you can check out its 30-Year Financials here.
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