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Is Exxon Mobil Corporation (NYSE:XOM) undervalued at 0.79x Price To Sales?


Exxon Mobil Corporation (NYSE:XOM) is currently trading at $36.86, at approximately 51.4% of its 52-week high of $71.37. With the stock price down -43.4% in the last year, it looks like the company is getting cheap. So, is Exxon Mobil Corporation undervalued? In this article, we’ll discuss Exxon Mobil Corporation’s valuation using different valuation models.

Historical Valuation

One of the quickest ways to spot if a company is getting too expensive is to compare the current valuation to its historical one. We can use the price to sales ratio to cut the noise and avoid the volatility of the company’s earnings.

Considering Exxon Mobil Corporation’s latest twelve months revenue/share of $46.32 and using the company’s 5-year average price to sales of 1.33x as a benchmark, we have a fair value of $61.40, which is 66.6% higher than the current price.

With no surprise, we can see that Exxon Mobil Corporation’s price to sales of 0.8x is much lower than its 5-year average of 1.3x, indicating that the company is probably trading at a discount to its fair value. We can easily visualize trends in the company’s fundamentals using the Finbox chart editor, as depicted below.

Source: Finbox Chart’s Engine

Absolute Valuation: Exxon Mobil Corporation DCF Analysis

Using a company’s historical valuation as a benchmark could lead to misleading results if a change in its fundamentals justifies the current valuation. So it’s always preferable to take into account the latest financial forecast and analyze the company with an absolute valuation model.

So, let’s analyze Exxon Mobil Corporation with a 5Y DCF analysis (EBITDA exit method). Using the latest 5Y revenue forecast CAGR of -0.5%, an average EBITDA margin forecast of 15.0%, a discount rate of 9.0%, and a terminal EBITDA multiple of 9.2x, we get a fair value of $82.9.

So, Is Exxon Mobil Corporation Undervalued?

Relying only on one or two financial models to determine a company’s fair value is never a good idea. It’s always preferable to use different models before coming to hasty conclusions.

The Finbox Fair Value Estimate is an advanced financial modeling technology that uses eleven different models to estimate the fair value of a stock and lets you get a company’s fair value at your fingertips. All the models are based on the same data utilized by the biggest investment banks and money managers in the world.

According to the estimate, Exxon Mobil Corporation’s fair value is $46.55, representing a 26.6% upside from the current price. Below are the fair value estimates for each model.

Source: Finbox Fair Value Estimates

Company’s Profile: Exxon Mobil Corporation

Exxon Mobil Corporation explores for and produces crude oil and natural gas in the United States, Canada/other Americas, Europe, Africa, Asia, and Australia/Oceania. It operates through Upstream, Downstream, and Chemical segments. The company is also involved in the manufacture, trade, transport, and sale of crude oil, petroleum products, and other specialty products; and manufactures and markets petrochemicals, including olefins, polyolefins, aromatics, and various other petrochemicals. As of December 31, 2019, it had approximately 23,857 net operated wells with proved reserves of 22.4 billion oil-equivalent barrels. In addition, the company produces raw materials, such as polypropylene and isopropyl alcohol for medical masks, gowns, and hand sanitizer. The company was founded in 1870 and is based in Irving, Texas.

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