Marathon Petroleum Corp (MPC, Financial) has recently showcased a daily gain of 3.08% and a 3-month gain of 36.94%. Its Earnings Per Share (EPS) (EPS) stand at 27.56. This valuation analysis seeks to answer the question: Is Marathon Petroleum's stock modestly overvalued? Read on to gain insightful perspectives on the company's valuation and financial health.
Company Overview
Marathon Petroleum Corp (MPC, Financial) is an independent refiner with 13 refineries across the midcontinent, West Coast, and Gulf Coast of the United States. With a total throughput capacity of 2.9 million barrels per day, the company also boasts renewable diesel production facilities in North Dakota and California. Additionally, Marathon Petroleum operates midstream assets primarily through its listed master limited partnership, MPLX. The stock currently trades at $149.75 per share, with a market cap of $59.90 billion, which suggests that it may be modestly overvalued compared to its GF Value of $134.15.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. 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. According to this measure, Marathon Petroleum (MPC, Financial) appears to be modestly overvalued.
Given that Marathon Petroleum is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth.
Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it's crucial to assess a company's financial strength before deciding to purchase shares. Marathon Petroleum has a cash-to-debt ratio of 0.4, which ranks worse than 56.96% of companies in the Oil & Gas industry. The overall financial strength of Marathon Petroleum is 7 out of 10, indicating that it is fair.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. Marathon Petroleum has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $156.80 billion and Earnings Per Share (EPS) of $27.56. Its operating margin is 10.44%, which ranks better than 53.04% of companies in the Oil & Gas industry. Overall, the profitability of Marathon Petroleum is ranked 8 out of 10, indicating strong profitability.
Growth is a crucial factor in a company's valuation. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. Marathon Petroleum's 3-year average annual revenue growth rate is 27.1%, which ranks better than 80.33% of companies in the Oil & Gas industry. Its 3-year average EBITDA growth rate is 60.9%, which ranks better than 88.03% of companies in the Oil & Gas industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Marathon Petroleum's ROIC was 21.62, while its WACC came in at 8.04.
Conclusion
In summary, Marathon Petroleum Corp (MPC, Financial) stock is estimated to be modestly overvalued. The company's financial condition is fair, its profitability is strong, and its growth ranks better than 88.03% of companies in the Oil & Gas industry. For a deeper dive into Marathon Petroleum's stock, check out its 30-Year Financials here.
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