With a daily loss of -2.98%, a 3-month gain of 31.37%, and an impressive Earnings Per Share (EPS) of 27.56, the question arises: Is Marathon Petroleum Corp (MPC, Financial) fairly valued? This article delves into a comprehensive valuation analysis of Marathon Petroleum, inviting readers to explore the company's financial health, profitability, growth, and intrinsic value.
Introduction to Marathon Petroleum
Marathon Petroleum is an independent refiner operating 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's facilities produce millions of gallons of renewable diesel annually. Marathon Petroleum also owns and operates midstream assets, primarily through its listed master limited partnership, MPLX. The company's current stock price stands at $143.38, while its estimated fair value (GF Value) is $134.2, indicating a fairly valued status.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line, visible on our summary page, represents the fair value at which the stock should ideally be traded. If the stock price significantly deviates from the GF Value Line, it indicates either overvaluation or undervaluation, influencing its future return.
Marathon Petroleum's stock shows every sign of being fairly valued based on the GF Value calculation. With a current price of $143.38 per share and a market cap of $57.30 billion, Marathon Petroleum's future return is likely to be close to the rate of its business growth, given its fair valuation.
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Examining Marathon Petroleum's Financial Strength
Investing in companies with low financial strength can result in permanent capital loss. Hence, it's crucial to review a company's financial strength before investing. Marathon Petroleum's cash-to-debt ratio is 0.4, ranking lower than 56.77% of companies in the Oil & Gas industry. Based on this, Marathon Petroleum's financial strength is ranked as 7 out of 10, indicating a fair balance sheet.
Profitability and Growth of Marathon Petroleum
Companies with consistent profitability over the long term offer less risk for investors. Marathon Petroleum, having been profitable 9 times over the past 10 years, boasts a revenue of $156.80 billion and Earnings Per Share (EPS) of $27.56. Its operating margin is 10.44%, ranking better than 52.78% of companies in the Oil & Gas industry. This strong profitability is reflected in its rank of 8 out of 10.
Growth is a pivotal factor in a company's valuation. Marathon Petroleum's 3-year average revenue growth rate is better than 80.35% of companies in the Oil & Gas industry. Its 3-year average EBITDA growth rate is 60.9%, ranking better than 87.92% of companies in the Oil & Gas industry.
ROIC vs WACC: A Measure of Profitability
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insights into its profitability. In the past 12 months, Marathon Petroleum's ROIC was 21.62 while its WACC came in at 8.04, indicating value creation for its shareholders.
Conclusion
In conclusion, Marathon Petroleum exhibits signs of being fairly valued. The company's financial condition is fair, its profitability is strong, and its growth ranks better than 87.92% 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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