Today we're going to take a closer look at large-cap Energy company Marathon Petroleum, whose shares are currently trading at $111.03. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Marathon Petroleum Is Currently Under Priced:
Marathon Petroleum Corporation, together with its subsidiaries, operates as an integrated downstream energy company primarily in the United States. The company belongs to the Energy sector, which has an average price to earnings (P/E) ratio of 7.54 and an average price to book (P/B) ratio of 1.68. In contrast, Marathon Petroleum has a trailing 12 month P/E ratio of 3.4 and a P/B ratio of 1.78.
When we divideMarathon Petroleum's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.07, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.
The Business Has Weak Operating Margins:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $124,016 | $69,779 | $119,983 | $177,453 |
| Gross Margins | 8.2% | 1.0% | 5.5% | 12.7% |
| Operating Margins | 4.8% | -3.9% | 2.8% | 10.7% |
| Net Margins | 2.13% | -14.21% | 8.12% | 8.18% |
| Net Income (MM) | $2,637 | -$9,919 | $9,738 | $14,516 |
| Net Interest Expense (MM) | -1,247 | -1,365 | -1,483 | -1,000 |
| Net Interest Expense (MM) | -$1,247 | -$1,365 | -$1,483 | -$1,000 |
| Depreciation & Amort. (MM) | -$3,638 | -$3,375 | -$3,364 | -$3,215 |
| Earnings Per Share | $3.97 | -$15.13 | $15.24 | $32.58 |
| EPS Growth | n/a | -481.11% | 200.73% | 113.78% |
| Diluted Shares (MM) | 664 | 649 | 638 | 430 |
| Free Cash Flow (MM) | $4,067 | -$368 | $2,896 | $13,941 |
| Capital Expenditures (MM) | -$5,374 | -$2,787 | -$1,464 | -$2,420 |
| Net Current Assets (MM) | -$35,279 | -$26,651 | -$21,296 | -$19,575 |
| Current Ratio | 1.25 | 1.81 | 1.7 | 1.76 |
| Long Term Debt (MM) | $28,127 | $28,730 | $24,968 | $25,634 |
| Net Debt / EBITDA | 3.25 | -4.19 | 1.39 | 0.79 |
Marathon Petroleum has exceptional EPS growth and low leverage. Additionally, the company's financial statements display growing revenues and decreasing reinvestment in the business and generally positive cash flows. However, the firm suffers from slimmer gross margins than its peers and weak operating margins with a positive growth rate. Finally, we note that Marathon Petroleum has a decent current ratio.
