Marathon Oil Corporation (NYSE: MRO), an energy company with a market capitalization of $15.4 billion, saw its share price increase by 20.3% over the last month. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could shares still be trading at a relatively cheap price? Let’s take a look at Marathon Oil’s outlook and value based on its most recent financial data to see if there are any catalysts for a price change.
What Is Marathon Oil Worth?
Welcoming news for investors, Marathon Oil is still trading at a fairly cheap price. According to our 6 valuation analyses, the intrinsic value for the stock is $24.61 per share and is currently trading at $18.31 in the market. This means that there is still an opportunity to buy now.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$28.64||56.5%|
|5-yr DCF Revenue Exit||$29.21||59.6%|
|Peer Revenue Multiples||$16.37||-10.6%|
|Peer EBITDA Multiples||$24.21||32.2%|
|10-yr DCF Growth Exit||$25.36||38.5%|
|5-yr DCF Growth Exit||$23.88||30.4%|
Click on any of the analyses above to view the latest model with real-time data.
What’s more interesting is that Marathon Oil’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
How Much Growth Will Marathon Oil Generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations.
source: finbox.io data explorer
With EBITDA expected to grow on average of 21.3% over the next couple years, the future certainly appears bright for Marathon Oil. It looks like higher cash flows are in the cards for shareholders, which should feed into a higher share valuation.
While many investors tend to categorize stocks as either value or growth plays, the most successful investors view growth in conjunction with a company’s value. Take legendary investor Peter Lynch for example, who is widely known for popularizing the term growth at a reasonable price (GARP).
GARP is a strategy that combines aspects of both growth and value investing techniques by finding high growth companies that don’t trade at overly high valuations. In the application of this strategy, Lynch achieved 29% annualized returns as the manager of Fidelity’s Magellan Fund from 1977 to 1990. Needless to say the importance of analyzing a company’s fair value in addition to its growth prospects.
Marathon Oil’s optimistic future growth does not appear to have been fully factored into the current share price with the stock still trading below its intrinsic value. Therefore, it may be a good time to purchase shares or increase your position in the company.
However, if you have not done so already, I highly recommend you complete your research on Marathon Oil by taking a look at the following:
Efficiency Metrics: return on equity is used to measure the return that a firm generates on the book value of common equity. View Marathon Oil’s return on equity here.
Risk Metrics: what is Marathon Oil’s cash ratio which is used to assess a company’s short-term liquidity. View the company’s cash ratio here.
Valuation Metrics: what is Marathon Oil’s free cash flow yield and how does it compare to its publicly traded peers? This metric measures the amount of free cash flow for each dollar of equity (market capitalization). Analyze the free cash flow yield here.
Author: Brian Dentino
Expertise: financial technology, analyzing market trends
Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors.
Brian can be reached at firstname.lastname@example.org.
As of this writing, Brian did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.