Marathon Petroleum Corp (MPC, Financial) has experienced a daily gain of 3.08% and a 3-month gain of 36.94%. The company's Earnings Per Share (EPS) (EPS) stands at 27.56. The question that arises now is, is Marathon Petroleum's stock modestly overvalued? This article delves into a detailed valuation analysis to answer this question. Keep reading to gain a deeper understanding of Marathon Petroleum's financial performance and valuation.
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. Marathon Petroleum also owns and operates midstream assets, primarily through its listed master limited partnership, MPLX. The company's current stock price is $149.75, and the GF Value, an estimation of its fair value, is $134.1, suggesting that the stock may be modestly overvalued.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, an adjustment factor from GuruFocus based on the company's past performance and growth, 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.
Marathon Petroleum's stock shows signs of being modestly overvalued according to the GF Value. With a market cap of $59.90 billion, the company's stock price is above the GF Value Line, suggesting that 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. Therefore, it is essential to research and review a company's financial strength before purchasing shares. Marathon Petroleum has a cash-to-debt ratio of 0.4, ranking worse than 56.96% of companies in the Oil & Gas industry. However, with an overall financial strength score of 7 out of 10, Marathon Petroleum's financial strength is fair.
Profitability and Growth
Investing in profitable companies carries less risk, especially if they have demonstrated consistent profitability over the long term. Marathon Petroleum has been profitable for 9 out of the past 10 years. With an operating margin of 10.44%, the company performs better than 53.04% of companies in the Oil & Gas industry. Moreover, Marathon Petroleum's growth ranks better than 80.33% of companies in the same industry, with a 3-year average annual revenue growth rate of 27.1%.
Return on Invested Capital Vs. Weighted Average Cost of Capital
A comparison of a company's return on invested capital (ROIC) and the weighted average cost of capital (WACC) provides another perspective on its profitability. For the past 12 months, Marathon Petroleum's ROIC has been 21.62, and its WACC has been 8.04.
Conclusion
In conclusion, Marathon Petroleum's stock appears to be modestly overvalued. The company's financial condition is fair, and its profitability is strong. Its growth outperforms 88.03% of companies in the Oil & Gas industry. To learn more about Marathon Petroleum's stock, you can check out its 30-Year Financials here. For high-quality companies that may deliver above-average returns, consider checking out GuruFocus High Quality Low Capex Screener.
