This week, I fundamentally analyze ExxonMobil’s stock. I review Exxon’s key ratios, derive the intrinsic value using Discounted Cash Flow (DCF) analysis, and look at expected rate of return from this investment.
In the recent months, the entire oil and gas sector has been hurt due to low crude oil prices; Exxon is no exception. As value investors, it is important to review the company’s fundamentals before deciding to invest in any company. Hope you all find this 15.75 minute video blog interesting. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), etc.
After taking into account the current free cash flow of $5,355 million figure, a 5% growth rate of FCF (growth for the next 10 years), 10% discount rate, 5% long term growth rate (growth from 10 year mark to perpetuity), 4,270 million shares outstanding, and $24,672 million of long term debt, the DCF analysis yields us an intrinsic value of $20 per share. Using the current stock price of about $33 per share, and taking into the shares outstanding and future projects of free cash flows, we get the expected rate of return of 4.9%.
0:37 Key Ratios Analysis
10:45 Discounted Cash Flow Analysis / Intrinsic Value
12:32 Expected Rate of Return Calculation
13:31 Summary / Conclusion
10K Annual Report: here
Morningstar Key Ratios Link: here.
Useful Resources here.
Company overview: Exxon Mobil Corporation, doing business as ExxonMobil, is an American multinational oil and gas corporation headquartered in Irving, Texas. It is the largest direct descendant of John D. Rockefeller’s Standard Oil, and was formed on November 30, 1999 by the merger of Exxon and Mobil.
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