Does Exxon Still Offer Value After Its 230% Five Year Surge?

• Wondering if Exxon Mobil is still a bargain after its big run over the last few years, or if the easy money has already been made? This article will walk you through what the numbers actually say about value today.
• The stock has been grinding higher, up 0.5% over the last week, 1.4% over the last month, 7.5% year to date and 229.8% over five years, which naturally raises the question of how much upside is left from here.
• Those moves come against a backdrop of shifting energy markets, from changing oil price expectations to renewed focus on capital discipline and shareholder returns across the majors. Exxon Mobil has also been in the headlines for its large scale investments in low carbon projects and carbon capture initiatives. Investors are watching these closely as they reassess the company’s long term cash flow profile and risk.
• On our simple 6 point framework, Exxon Mobil scores a 4 out of 6 valuation score, suggesting the stock screens as undervalued on most, but not all, metrics. Next we will unpack how different valuation approaches arrive at that view and introduce a more intuitive way to think about fair value by the end of this article.

Exxon Mobil delivered 4.7% returns over the last year. See how this stacks up to the rest of the Oil and Gas industry.

Approach 1: Exxon Mobil Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow model estimates what a company is worth by projecting the cash it can generate in the future and then discounting those cash flows back to today in dollar terms. For Exxon Mobil, Simply Wall St uses a 2 Stage Free Cash Flow to Equity model built on cash flow projections.

Exxon Mobil generated around $28.1 billion of free cash flow over the last twelve months. Analysts provide detailed forecasts for the next few years, and beyond that Simply Wall St extrapolates those trends. Under this framework, free cash flow is projected to rise to about $44.7 billion by 2029, with further steady growth assumed through 2035 as the company expands and matures.

When all those future cash flows are discounted back to today, the model arrives at an estimated intrinsic value of about $285.39 per share. Based on this DCF, the stock screens as roughly 59.6% undervalued relative to its current trading price, suggesting a wide margin of safety if those cash flow assumptions prove broadly accurate.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Exxon Mobil is undervalued by 59.6%. Track this in your watchlist or portfolio, or discover 933 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Exxon Mobil.

Approach 2: Exxon Mobil Price vs Earnings

For a mature, consistently profitable business like Exxon Mobil, the price to earnings ratio is a practical way to gauge value because it links what investors pay today to the company’s current earnings power. In general, faster expected growth and lower perceived risk justify a higher PE multiple, while slower growth or higher risk call for a lower one.

Exxon Mobil currently trades on about 16.24x earnings, which is above the Oil and Gas industry average of roughly 13.49x, but below the broader peer group average of around 23.90x. Simply Wall St uses its Fair Ratio, a proprietary estimate of what a reasonable PE should be after factoring in Exxon Mobil’s earnings growth outlook, margins, industry, size and risk profile. For Exxon Mobil, that Fair Ratio is about 24.35x.

Because the Fair Ratio is tailored to the company’s fundamentals, it can be more informative than a basic comparison with industry or peer averages. Measured against this 24.35x Fair Ratio, the current 16.24x PE suggests Exxon Mobil still trades at a meaningful discount.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Exxon Mobil Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple tool on Simply Wall St’s Community page that lets you connect your view of a company’s story to a financial forecast and, ultimately, to a fair value estimate. A Narrative is where you spell out what you believe about Exxon Mobil’s future revenues, earnings and margins, then translate that story into a forecast and a fair value that you can compare against today’s share price to decide whether to buy, hold or sell. Because Narratives on the platform are updated dynamically as new information like earnings reports or major news comes in, your fair value view evolves alongside the business rather than staying frozen at one point in time. For example, some Exxon Mobil Narratives on Simply Wall St currently see fair value as low as about $128 per share while others see it closer to $174, reflecting very different expectations for oil prices, Guyana, low carbon projects and capital returns, yet all grounded in explicit assumptions you can inspect and adjust for yourself.

Do you think there's more to the story for Exxon Mobil? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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