Exxon Mobil Corporation (XOM)

Equity
US
Energy

RISK

RETURN

Key risk factors

Strong & resilient to price shocks

Low price volatility

Good trading liquidity

Key return factors

Solid dividends

Strong margins and returns

Overvalued vs peers

Company profileExxon Mobil Corporation explores for and produces crude oil and natural gas in the United States and internationally. It operates through Upstream, Downstream, and Chemical segments. The company is also involved in the manufacture, trade, transport, and sale of crude oil, natural gas, petroleum products, petrochemicals, and other specialty products; manufactures and sells petrochemicals, including olefins, polyolefins, aromatics, and various other petrochemicals; and captures and stores carbon, hydrogen, and biofuels. As of December 31, 2021, it had approximately 20,528 net operated wells with proved reserves. The company was founded in 1870 and is headquartered in Irving, Texas.

Valuation: Overvalued

Multiple

TTM

NTM

P/E

14.40

13.30

PEG

1.10

P/B

2.30

2.10

P/S

1.60

1.50

P/FCF

16.50

19.20

EV/EBITDA

8.40

9.50

From both historical and forecast perspectives, the stock is overpriced compared to similar stocks. In particular, the stock is reasonably priced on P/E, of fair value on EV/EBITDA, and overvalued on P/FCF.

Performance: Mixed

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Over the past six months the stock has exceeded the performance of this peer group by 7ppts and its growth decelerated by 5ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

Analyst view: Somewhat favourable

The average target price is 121 and suggests 4% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 141.4. This translates into 22% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 102.3. This is equivalent to 11% downside potential in the worst case.

Profitability: Strong

RoE

Exxon Mobil Corporation reported a return on equity (RoE) of 16.0% in the last 12 months, down from 30.7% in FY22. The market consensus projects an RoE of 26.9% in FY24, again ahead of its peers.

RoA

Another important profitability metric, return on assets (RoA), amounted to 8.7% in the last 12 months, a decrease from 15.7% in FY22. The market analysts predict that RoA will be 14.7% in FY24, again stronger than its peers.

RoCE

In the last 12 months, the return on capital employed (RoCE) declined to 10.6%, above the peers. The consensus estimate for FY24 for RoCE is 25.7%, again ahead of the peers.

Net margin

EBITDA margin

Historically, XOM has reported good net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 9.7%, down from 13.5% in FY22. The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 18.8% in the last 12 months, a decline from 27.7% in FY22.

RoIC / WACC = 2.6(strong value creation)

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 2.6 in the past several years. This ratio implies a strong shareholder value creation.

Growth: Average

Revenue

EBITDA

EPS

Free cash flow

XOM reported revenue of USD 338 703mn in the last 12 months, down 1% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 8% from FY23 to USD 8.17. Market expects EPS to reach USD 8.51 in FY24.Revenue growth has been moderate in the past several years (positive-to-neutral), while EBITDA has grown very rapidly in recent years (positive). Net income has fallen rapidly in recent years (strongly negative). Free cash flow, on the contrary, has climbed rapidly in recent years thanks to good cash generation, in contrast to the EBITDA dynamics. We emphasize the highly volatile dynamics of all key metrics. This is an extremely negative factor.

Dividends: Solid

Dividend paid

Dividend yield

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been good and slightly above its peers. On average, the company pays dividends quarterly, which may appeal to investors valuing a regular income stream.

Default risk: Limited

The risk of default is minimal. We note solid return on capital, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors and we point to slow historical revenue growth, and poor working capital management.

Volatility: Low

In normal market circumstances, XOM is not overly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will remain relatively stable. The stock's losses on its worst days (less than 1-5% of the time) will range from low to minimal.

Stress-test: Negligible

In highly turbulent market conditions, XOM is not volatile. In other words, the stock will fall far less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be very low.

Selling difficulty: Low

XOM boasts high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and remains favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions.

Country risk: Very low

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

Other risks: Negligible

No other major risks have been identified.