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.
Trades Around Its Graham Number but Has an Elevated P/E Ratio:
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 8.53 and an average price to book (P/B) ratio of 1.78. In contrast, Exxon Mobil has a trailing 12 month P/E ratio of 11.7 and a P/B ratio of 2.02.
When we divide Exxon Mobil's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -1.08. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
Strong Revenue Growth With a Flat Capital Expenditure Trend:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $290,212 | $264,938 | $181,502 | $285,640 | $413,680 | $355,667 |
| Revenue Growth | n/a | -8.71% | -31.49% | 57.38% | 44.83% | -14.02% |
| Operating Margins | 11% | 8% | -16% | 11% | 19% | 17% |
| Net Margins | 7% | 5% | -12% | 8% | 13% | 12% |
| Net Income (MM) | $20,840 | $14,340 | -$22,440 | $23,040 | $55,740 | $41,130 |
| Net Interest Expense (MM) | $766 | $830 | $1,158 | $947 | $798 | $784 |
| Depreciation & Amort. (MM) | $18,745 | $18,998 | $46,009 | $20,607 | $24,040 | $17,965 |
| Earnings Per Share | $4.88 | $3.36 | -$5.25 | $5.39 | $13.26 | $10.07 |
| EPS Growth | n/a | -31.15% | -256.25% | 202.67% | 146.01% | -24.06% |
| Diluted Shares (MM) | 4,237 | 4,235 | 4,232 | 4,233 | 4,234 | 4,071 |
| Free Cash Flow (MM) | $16,440 | $5,355 | -$2,614 | $36,053 | $58,390 | $37,834 |
| Capital Expenditures (MM) | $19,574 | $24,361 | $17,282 | $12,076 | $18,407 | $21,474 |
| Current Ratio | 0.84 | 0.78 | 0.8 | 1.04 | 1.41 | 1.42 |
| Total Debt (MM) | $37,796 | $46,920 | $67,640 | $47,704 | $41,193 | $41,253 |
| Net Debt / EBITDA | 0.7 | 1.12 | 3.69 | 0.79 | 0.11 | 0.11 |
Exxon Mobil has rapidly growing revenues and a flat capital expenditure trend and generally positive cash flows. Additionally, the company's financial statements display a strong EPS growth trend and healthy leverage levels. Furthermore, Exxon Mobil has weak operating margins with a positive growth rate and just enough current assets to cover current liabilities, as shown by its current ratio of 1.42.
