Exxon Mobil Corp (XOM, Financial) has shown a daily gain of 3.43% and a 3-month gain of 5.32%. Its Earnings Per Share (EPS) stand at 12.5. The question we're aiming to answer is: is Exxon Mobil fairly valued? In this analysis, we will delve into the company's valuation, financial strength, profitability, and growth. We encourage you to read on for a comprehensive understanding of Exxon Mobil's current position.
Company Overview
Exxon Mobil Corp (XOM, Financial), an integrated oil and gas company, explores for, produces, and refines oil worldwide. In 2022, it produced 2.4 million barrels of liquids and 8.3 billion cubic feet of natural gas daily. The company boasts reserves of 17.7 billion barrels of oil equivalent, with 65% being liquids. As the world's largest refiner, Exxon Mobil has a global refining capacity of 4.6 million barrels of oil per day and is a leading manufacturer of commodity and specialty chemicals. The company's stock price currently stands at $109.99, with a GF Value of $104.03, indicating a fair valuation.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. The GF Value Line, visible on our summary page, gives an overview of the stock's fair trading value. This value is calculated based on historical trading multiples, a GuruFocus adjustment factor 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, the stock may be overvalued, and its future return may be poor. Conversely, if the stock price is significantly below the GF Value Line, the stock may be undervalued, and its future return may be high.
Exxon Mobil, with a market cap of $440.30 billion, appears to be fairly valued according to GuruFocus' valuation method. As a result, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with poor financial strength can lead to a high risk of permanent capital loss. To avoid this, it's crucial to research and review a company's financial strength before purchasing shares. One way to gauge this is by looking at a company's cash-to-debt ratio and interest coverage. Exxon Mobil has a cash-to-debt ratio of 0.71, ranking better than 53.94% of companies in the Oil & Gas industry. Overall, Exxon Mobil's financial strength stands at 8 out of 10, indicating a strong financial position.
Profitability and Growth
Investing in profitable companies generally carries less risk. Companies with high profit margins typically offer better performance potential than those with low profit margins. Exxon Mobil has been profitable for 9 out of the past 10 years. In the past 12 months, the company had revenues of $364.10 billion and Earnings Per Share (EPS) of $12.5. Its operating margin of 16.67% is better than 62.58% of companies in the Oil & Gas industry. Overall, GuruFocus ranks Exxon Mobil's profitability as fair.
Growth is a crucial factor in the valuation of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Exxon Mobil is 15.9%, ranking better than 61.29% of companies in the Oil & Gas industry. The 3-year average EBITDA growth rate is 37%, ranking better than 75.33% of companies in the Oil & Gas industry.
ROIC vs WACC
Another way to determine a company's profitability is to compare its return on invested capital (ROIC) to the weighted average cost of capital (WACC). The ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Exxon Mobil's ROIC is 16.08, and its cost of capital is 8.09.
Conclusion
In summary, Exxon Mobil appears to be fairly valued. The company's financial condition is strong, and its profitability is fair. Its growth ranks better than 75.33% of companies in the Oil & Gas industry. To learn more about Exxon Mobil stock, you can check out its 30-Year Financials here.
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