Exxon Mobil Investors, You Need to Know This

We've been asking ourselves recently if the market has placed a fair valuation on Exxon Mobil. Let's dive into some of the fundamental values of this large-cap Energy company to determine if there might be an opportunity here for value-minded investors.

Exxon Mobil's Valuation Is in Line With Its Sector Averages:

Exxon Mobil Corporation engages in the exploration and production of crude oil and natural gas in the United States and internationally. 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, Exxon Mobil has a trailing 12 month P/E ratio of 8.8 and a P/B ratio of 2.21.

When we divideExxon Mobil's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.26, 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:

2018-02-28 2019-02-27 2020-02-26 2021-02-24 2022-02-23 2023-02-22
Revenue (MM) $238,983 $279,332 $259,497 $179,770 $278,983 $402,217
Gross Margins 33.0% 31.0% 30.0% 31.0% 31.0% 32.0%
Operating Margins 18% 19% 18% -2% 20% 24%
Net Margins 8.0% 7.0% 6.0% -12.0% 8.0% 14.0%
Net Income (MM) $19,710 $20,840 $14,340 -$22,440 $23,040 $55,740
Net Interest Expense (MM) -$601 -$766 -$830 -$1,158 -$947 -$798
Depreciation & Amort. (MM) -$19,893 -$18,745 -$18,998 -$46,009 -$20,607 -$24,040
Earnings Per Share $4.63 $4.88 $3.36 -$5.25 $5.39 $13.04
EPS Growth n/a 5.4% -31.15% -256.25% 202.67% 141.93%
Diluted Shares (MM) 4,256 4,270 4,270 4,271 4,275 4,274
Free Cash Flow (MM) $45,468 $55,588 $54,077 $31,950 $60,205 $95,204
Capital Expenditures (MM) -$15,402 -$19,574 -$24,361 -$17,282 -$12,076 -$18,407
Net Current Assets (MM) -$107,057 -$99,695 -$113,607 -$123,727 -$104,086 -$68,963
Long Term Debt (MM) $24,406 $20,538 $26,342 $47,182 $43,428 $40,559
Net Debt / EBITDA 0.61 0.48 0.67 1.48 0.54 0.1

Exxon Mobil has weak revenue growth and a flat capital expenditure trend, irregular cash flows, and just enough current assets to cover current liabilities. We also note that the company benefits from low leverage and a strong EPS growth trend. However, the firm suffers from slimmer gross margins than its peers and weak operating margins with a stable trend.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.