Exxon Mobil: Are Today's Prices Really Attractive?

Exxon Mobil's Value and Market Dynamics

These days, you are not alone in wondering whether Exxon Mobil's current prices are attractive; many investors are questioning whether the company's value is appealing after the recent movements in the oil market.

Last week, Exxon's shares rose by 2.5%, and over the past month, there has been a gain of 5.9%. This situation indicates a renewed optimism among investors or changes in risk perceptions.

A significant part of the recent momentum in share prices is attributed to ongoing news regarding Exxon's expansion into low-carbon initiatives and the completion of major energy infrastructure projects. Ongoing share buyback programs and a strong balance sheet have increased long-term investor interest in Exxon.

Exxon Mobil's valuation score is set at 4 out of 6, while more analysis is required to understand how fair its current price really is. At the end of this article, we will provide a complete picture by reviewing several valuation approaches.

Financial Performance and Cash Flow

Exxon Mobil has provided a return of 0.3% over the past year. You can see how it stands compared to the rest of the Oil and Gas industry.

The Discounted Cash Flow (DCF) model estimates a company's fair value by forecasting its future cash flows and discounting those amounts to the present using an appropriate rate. This approach aims to reflect the company's true intrinsic value by measuring the money it can return to shareholders over time.

Exxon Mobil's current Free Cash Flow is recorded at $28.1 billion. Analysts expect this figure to grow over the next few years, projecting it to rise to $44.7 billion by 2029. Simply Wall St forecasts a Free Cash Flow of $62.4 billion by 2035 by extending these figures over a full decade.

When future cash flows are discounted to the present in this way, the DCF method calculates the intrinsic value estimate per share at $289.29. Compared to the current market price, this indicates that the share is trading at a discount of approximately 59.5%. This significant gap suggests that Exxon Mobil is seriously undervalued according to the DCF model.

Price/Earnings Ratio and Valuation Criteria

Conclusion: VALUATION

Our Discounted Cash Flow (DCF) analysis indicates that Exxon Mobil is undervalued by 59.5%. Add this to your watchlist or discover more about over 874 undervalued stocks based on cash flows.

The Price/Earnings ratio (PE) is a popular method for determining the value of well-established and profitable companies like Exxon Mobil; it shows how much investors are willing to pay for each dollar of earnings. This is why it is particularly useful when comparing firms within the industry or market.

A company's fair PE ratio depends on factors like growth expectations and risk profile. Higher growth and lower risk typically justify a higher PE ratio; conversely, lower growth or higher risk demands a lower ratio.

Currently, Exxon Mobil’s PE ratio is set at 16.5x. This ratio is above the industry average of 13.5x but below the sector average of 22.7x. However, these benchmarks provide context but do not account for Exxon Mobil's unique attributes.

Simply Wall St's 'Fair Ratio' calculation comes into play here. The Fair PE Ratio for Exxon Mobil is calculated at 22.7x, reflecting the unique mix of the company's earnings growth, sector, market capitalization, margins, and risk profile. This approach offers a more thoughtful perspective, taking into account Exxon's specific strengths and weaknesses.

When we compare the current PE ratio (16.5x) with the Fair PE Ratio (22.7x), it is clear that the stock is currently undervalued in terms of earnings.

Conclusion: VALUATION

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As we mentioned earlier, there is a better way to understand valuation. At this point, it is beneficial to delve into the concept of 'Stories.' A story is your opportunity to create a narrative behind the numbers; it helps you capture your personal perspective on the true potential of the company by combining your fair value calculations, future revenues, earnings, and margin expectations.

In contrast to traditional methods that focus strictly on numbers, Stories allow you to reflect your personal insights into the potential for success and rapid change by merging the company's unique narrative with financial predictions. This tool, used by millions on Simply Wall St's Community page, enables investors of all levels to easily model their forward-looking personal views.

Stories highlight the difference between the Fair Value you calculate and today’s stock price, helping you make smarter buy or sell decisions. They are also automatically updated as new information becomes available, such as company news or earnings.

For example, some Exxon Mobil stories suggest that, based on a cautious outlook on energy demand, the fair value could be as low as $132 per share. Others, however, taking into account aggressive growth in Guyana and stable oil prices, could estimate that value to be as high as $174. This demonstrates how different assumptions can lead to different outcomes, enabling you to invest with greater confidence and context.

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