Why you should avoid XOM Stock: Legal Troubles, Valuation, and Financials

Today we are looking at Exxon Mobil Corporation (NYSE: XOM), to determine if you should buy XOM stock. We will look at XOM financial ratios, analyst ratings, and current valuation to determine a XOM forecast and price. What Does XOM Do? Exxon Mobil Corporation explores for and produces crude oil and natural gas in the United States and internationally. It operates through Upstream, Downstream, and Chemical segments. The company is also involved in the manufacture, trade, transport, and sale of crude oil, natural gas, petroleum products, petrochemicals, and other specialty products; manufactures and sells petrochemicals, including olefins, polyolefins, aromatics, and various other petrochemicals; and captures and stores carbon.. XOM Stock Analysis and Forecast Exxon Mobil Corporation Competition and Comparables In order to undergo a comparable analysis (to determine XOM stocks value), we need to first outline who XOM's competitors are. These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to XOM, and have a market cap similar to XOM (if possible). By keeping this in mind, I found the following list of companies to be some of XOM stocks closest competitors: CVX, RDS-B, RDS-A, PTR, TTE, COP, BP, EQNR, ENB, SNP XOM Stock News and Information Recent news XOM is forced into yet another trial based on their busieness practices. This quote from an article (from the Guardian) sums it up, "The Massachusetts high court on Tuesday ruled that the US’s largest oil company, ExxonMobil, must face a trial over accusations that it lied about the climate crisis and covered up the fossil fuel industry’s role in worsening environmental devastation."  This is not ideal for the XOM stock, especially as more people turn to forms of sustainable and responsable investing. Analysis of Exxon Mobil Corporation Stock Performance and Financial Ratios Yearly: XOM Revenues: In FY 2021, XOM experienced a yearly increase in revenues of $98.12B (or 54.95%) resulting in a total revenue figure of $276.69B. XOM Cost of Revenues: In FY 2021, XOM experienced a yearly increase in their cost of revenues of $41.36B (24.27%), resulting in a total revenue figure of $211.81B. Since the increase (of 24.27%), in XOM's cost of revenue was lesser (by -30.68%) than the increase (of 54.95%) in XOM's revenues, we should expect that XOM experienced an increase (roughly 30.68%) in their FY gross profits. XOM Gross Profit: In FY 2021, XOM experienced a yearly increase in their gross profit of $56.76B (or 698.4%) resulting in a total gross profit of $64.89B. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between FY and FY. XOM EBITDA: In FY 2021, XOM experienced a yearly increase in their EBITDA of $33.13B (or 173.53%) resulting in a total EBITDA of $52.23B. This increase (of 173.53%) stems from the fact that XOM experienced a increase in their gross profits of 698.4% (as we saw in the previous bullet point) Overall, XOM had a fantstic year in 2021. Howver, their great performance was largely due to the performance of oil as a commodity in 2021. Quarterly: XOM Revenues: In Q1 2022, XOM experienced a quarterly increase in revenues of $6.43B (or 7.91%) resulting in a total revenue figure of $87.73B. XOM Cost of Revenues: In Q1 2022, XOM experienced a quarterly increase in their cost of revenues of $9.58B (15.47%), resulting in a total revenue figure of $71.51B. Since the increase (of 15.47%), in XOM's cost of revenue was greater (by 7.56%) than the increase (of 7.91%) in XOM's revenues, we should expect that XOM experienced an decrease (roughly -7.56%) in their Q1 gross profits. XOM Gross Profit: In Q1 2022, XOM experienced a quarterly decrease in their gross profit of $-3.15B (or -16.26%) resulting in a total gross profit of $16.22B. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between Q1 and Q4. XOM EBITDA: In Q1 2022, XOM experienced a quarterly decrease in their EBITDA of $-45M (or -0.26%) resulting in a total EBITDA of $17.36B. This decrease (of -0.26%) stems from the fact that XOM experienced a decrease in their gross profits of -16.26% (as we saw in the previous bullet point). XOM Net Income: In Q1 2022, XOM experienced a quarterly decrease in their net income of $-3.39B (or -38.22%) resulting in a total net income of $5.48B. XOM EPS: As a result of XOM's decrease in net income of $-3.39B, XOM's EPS also decreased (by $-0.8) from $2.08 in Q4 2021 to $1.28 in Q1 2022 Overall, it seems as though XOM had a poor financial performance (due to EPS $-0.8) as many of their financial metrics shrunk, most notably their EPS (by $-0.8), as well as their net income (by $-3.39B), and other metrics (as you can tell from the above bullet points). However, XOM stock missed their EPS estimate by $-0.05(or -2.36%), as they reported an EPS of $2.07or the quarter (compared to their estimated EPS of $2.12). This was also all during a tinme where oil prices were soaring, which may be an indication od bad thinngs ahead for XOM. Is XOM Share Dilution an Issue? As part of their Q1 2022 earnings release, XOM stated that they currently have 4.27B Shares Outstanding (weighted average), which is up 1.58M shares (from 4.26B shares outstanding in Q4 2021). This is essentially negligible and is not anything that investoors should be worried about. Furthermore, XOM stock has up to 10.58M of shares that they can issue (thereby diluting XOM's stock). This maximum dilution for the period would only have a dilutionary effect on XOM of 0%, which is also negligible. Latest XOM Stock Analyst Ratings Here is the current analyst rating distribution for XOM. In total there are 32 XOM stock analyst ratings. 19 Buys 11 Holds 2 Sells Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if XOM stock is a buy or sell XOM Stock Rating and Forecast Currently, we have 3 financial ratings that help investors get a general idea of a company's valuation. These 3 metrics include DCF, ROE, and P/E, which are very common in the investing/valuation climate. Firstly, XOM stock has a DCF rating of 5 - Very Strong. DCF ratings determine the value behind a company based on their financial projections, expectations, and discount rate (time value of money). This is one of the most used valuation models in the stock market, and thus a high level of importance should be associated with this rating. Secondly, XOM stock has an ROE rating of 3 - Neutral.. XOM's current ROE is 15.7%, which justifies their rank of 3 - Neutral. ROE shows us how good (or bad) a company is at using their shareholders funds to generate money (returns). ROE is most useful when compared against the industry average, which is currently 14.73%. I think that XOM should have a score of 4 or 5 in this category as their ROE is high (above 15%) and is higher than the average ROE of their peers. Lastly, XOM stock has a P/E rating of 4 - Strong. XOM stock price to earnings ratio is currently 15.97 which justifies their rank of 4 - Strong. Price to Earnings is the most commonly found financial metric and is best used when comparing a company's p/e to the industry average. XOM operates in the Oil & Gas Integrated industry, which currently has an average P/E of 16.59. Overall, based on the 3 previously mentioned fields, XOM stock has been given a comprehensive rating of 4 - Strong. This rating implies that they are healthy financially. XOM Stock Price Prediction and Valuation The Latest XOM Ratings As we know, XOM stock has been given an overall rating of 4 - Strong. This implies that XOM is sound fundamentally and is a good candidate for being “undervalued”. With this in mind, let's proceed. XOM Price Forecast Using Comparable Analysis Price to Book (P/B): XOM's current P/B ratio is 2.43, compared to the average P/B ratio of XOM's peers being 1.62. This implies that XOM is overvalued and their share price should change by a factor of -33.42% to be at fair value (based on XOM's P/B compared to the P/B of their peers). Price to Equity (P/E): XOM stock P/E ratio is currently 15.97, compared to the average P/E ratio of XOM's peers being 16.59. This implies that XOM is undervalued and their share price should change by a factor of 3.87% to be at fair value (based on XOM's P/E compared to the P/E of their peers). Overall, XOM stock is overvalued and needs to experience a change in stock price of (an average of) -14.77% to be considered “at fair value”. Is XOM Stock a Buy or Sell? Overall, due to the overall stock rating of 4 - Strong (Based off of DCF, ROE, and P/E), as well as the fact that a comparable analysis (P/E and P/B) found that XOM was overvalued and need to experience a price change of -14.77% in order to be at their fair value, I have concluded the following: Based off of an overall look at XOM's financials (encompassing all of P/E, P/B, ROE, FCF Yield, and DCF) I think it is safe to say that XOM is pretty close to fair value, and is financially health. Despite this, I would consider entering into a bear position (if anything) on the XOM Stock.

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Why you should avoid XOM Stock: Legal Troubles, Valuation, and Financials

May 27, 2022

bearish

general Analysis

[7 min Read]

Today we are looking at Exxon Mobil Corporation (NYSE: XOM), to determine if you should buy XOM stock. We will look at XOM financial ratios, analyst ratings, and current valuation to determine a XOM forecast and price.

What Does XOM Do?

Exxon Mobil Corporation explores for and produces crude oil and natural gas in the United States and internationally. It operates through Upstream, Downstream, and Chemical segments. The company is also involved in the manufacture, trade, transport, and sale of crude oil, natural gas, petroleum products, petrochemicals, and other specialty products; manufactures and sells petrochemicals, including olefins, polyolefins, aromatics, and various other petrochemicals; and captures and stores carbon..


XOM Stock Analysis and Forecast

Exxon Mobil Corporation Competition and Comparables

In order to undergo a comparable analysis (to determine XOM stocks value), we need to first outline who XOM's competitors are.

These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to XOM, and have a market cap similar to XOM (if possible).

By keeping this in mind, I found the following list of companies to be some of XOM stocks closest competitors:

CVX, RDS-B, RDS-A, PTR, TTE, COP, BP, EQNR, ENB, SNP


XOM Stock News and Information

Recent news

XOM is forced into yet another trial based on their busieness practices. This quote from an article (from the Guardian) sums it up, "The Massachusetts high court on Tuesday ruled that the US's largest oil company, ExxonMobil, must face a trial over accusations that it lied about the climate crisis and covered up the fossil fuel industry's role in worsening environmental devastation."

This is not ideal for the XOM stock, especially as more people turn to forms of sustainable and responsable investing.

Analysis of Exxon Mobil Corporation Stock Performance and Financial Ratios

Yearly:

  • XOM Revenues: In FY 2021, XOM experienced a yearly increase in revenues of $98.12B (or 54.95%) resulting in a total revenue figure of $276.69B.
  • XOM Cost of Revenues: In FY 2021, XOM experienced a yearly increase in their cost of revenues of $41.36B (24.27%), resulting in a total revenue figure of $211.81B. Since the increase (of 24.27%), in XOM's cost of revenue was lesser (by -30.68%) than the increase (of 54.95%) in XOM's revenues, we should expect that XOM experienced an increase (roughly 30.68%) in their FY gross profits.
  • XOM Gross Profit: In FY 2021, XOM experienced a yearly increase in their gross profit of $56.76B (or 698.4%) resulting in a total gross profit of $64.89B. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between FY and FY.
  • XOM EBITDA: In FY 2021, XOM experienced a yearly increase in their EBITDA of $33.13B (or 173.53%) resulting in a total EBITDA of $52.23B. This increase (of 173.53%) stems from the fact that XOM experienced a increase in their gross profits of 698.4% (as we saw in the previous bullet point)

Overall, XOM had a fantstic year in 2021. Howver, their great performance was largely due to the performance of oil as a commodity in 2021.

Quarterly:

  • XOM Revenues: In Q1 2022, XOM experienced a quarterly increase in revenues of $6.43B (or 7.91%) resulting in a total revenue figure of $87.73B.
  • XOM Cost of Revenues: In Q1 2022, XOM experienced a quarterly increase in their cost of revenues of $9.58B (15.47%), resulting in a total revenue figure of $71.51B. Since the increase (of 15.47%), in XOM's cost of revenue was greater (by 7.56%) than the increase (of 7.91%) in XOM's revenues, we should expect that XOM experienced an decrease (roughly -7.56%) in their Q1 gross profits.
  • XOM Gross Profit: In Q1 2022, XOM experienced a quarterly decrease in their gross profit of $-3.15B (or -16.26%) resulting in a total gross profit of $16.22B. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between Q1 and Q4.
  • XOM EBITDA: In Q1 2022, XOM experienced a quarterly decrease in their EBITDA of $-45M (or -0.26%) resulting in a total EBITDA of $17.36B. This decrease (of -0.26%) stems from the fact that XOM experienced a decrease in their gross profits of -16.26% (as we saw in the previous bullet point).
  • XOM Net Income: In Q1 2022, XOM experienced a quarterly decrease in their net income of $-3.39B (or -38.22%) resulting in a total net income of $5.48B.
  • XOM EPS: As a result of XOM's decrease in net income of $-3.39B, XOM's EPS also decreased (by $-0.8) from $2.08 in Q4 2021 to $1.28 in Q1 2022

Overall, it seems as though XOM had a poor financial performance (due to EPS $-0.8) as many of their financial metrics shrunk, most notably their EPS (by $-0.8), as well as their net income (by $-3.39B), and other metrics (as you can tell from the above bullet points).

However, XOM stock missed their EPS estimate by $-0.05(or -2.36%), as they reported an EPS of $2.07or the quarter (compared to their estimated EPS of $2.12).

This was also all during a tinme where oil prices were soaring, which may be an indication od bad thinngs ahead for XOM.

Is XOM Share Dilution an Issue?

As part of their Q1 2022 earnings release, XOM stated that they currently have 4.27B Shares Outstanding (weighted average), which is up 1.58M shares (from 4.26B shares outstanding in Q4 2021). This is essentially negligible and is not anything that investoors should be worried about.

Furthermore, XOM stock has up to 10.58M of shares that they can issue (thereby diluting XOM's stock). This maximum dilution for the period would only have a dilutionary effect on XOM of 0%, which is also negligible.

Latest XOM Stock Analyst Ratings

Here is the current analyst rating distribution for XOM. In total there are 32 XOM stock analyst ratings.

  • 19 Buys
  • 11 Holds
  • 2 Sells

Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if XOM stock is a buy or sell

XOM Stock Rating and Forecast

Currently, we have 3 financial ratings that help investors get a general idea of a company's valuation. These 3 metrics include DCF, ROE, and P/E, which are very common in the investing/valuation climate.

Firstly, XOM stock has a DCF rating of 5 - Very Strong. DCF ratings determine the value behind a company based on their financial projections, expectations, and discount rate (time value of money). This is one of the most used valuation models in the stock market, and thus a high level of importance should be associated with this rating.

Secondly, XOM stock has an ROE rating of 3 - Neutral.. XOM's current ROE is 15.7%, which justifies their rank of 3 - Neutral. ROE shows us how good (or bad) a company is at using their shareholders funds to generate money (returns). ROE is most useful when compared against the industry average, which is currently 14.73%. I think that XOM should have a score of 4 or 5 in this category as their ROE is high (above 15%) and is higher than the average ROE of their peers.

Lastly, XOM stock has a P/E rating of 4 - Strong. XOM stock price to earnings ratio is currently 15.97 which justifies their rank of 4 - Strong. Price to Earnings is the most commonly found financial metric and is best used when comparing a company's p/e to the industry average. XOM operates in the Oil & Gas Integrated industry, which currently has an average P/E of 16.59.

Overall, based on the 3 previously mentioned fields, XOM stock has been given a comprehensive rating of 4 - Strong. This rating implies that they are healthy financially.

XOM Stock Price Prediction and Valuation

The Latest XOM Ratings

As we know, XOM stock has been given an overall rating of 4 - Strong. This implies that XOM is sound fundamentally and is a good candidate for being “undervalued”. With this in mind, let's proceed.

XOM Price Forecast Using Comparable Analysis

  1. Price to Book (P/B): XOM's current P/B ratio is 2.43, compared to the average P/B ratio of XOM's peers being 1.62. This implies that XOM is overvalued and their share price should change by a factor of -33.42% to be at fair value (based on XOM's P/B compared to the P/B of their peers).
  2. Price to Equity (P/E): XOM stock P/E ratio is currently 15.97, compared to the average P/E ratio of XOM's peers being 16.59. This implies that XOM is undervalued and their share price should change by a factor of 3.87% to be at fair value (based on XOM's P/E compared to the P/E of their peers).

Overall, XOM stock is overvalued and needs to experience a change in stock price of (an average of) -14.77% to be considered “at fair value”.

Is XOM Stock a Buy or Sell?

Overall, due to the overall stock rating of 4 - Strong (Based off of DCF, ROE, and P/E), as well as the fact that a comparable analysis (P/E and P/B) found that XOM was overvalued and need to experience a price change of -14.77% in order to be at their fair value, I have concluded the following:

Based off of an overall look at XOM's financials (encompassing all of P/E, P/B, ROE, FCF Yield, and DCF) I think it is safe to say that XOM is pretty close to fair value, and is financially health. Despite this, I would consider entering into a bear position (if anything) on the XOM Stock.

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XOM

Exxon Mobil Corporation

88.00

0.45
0.51%

Return

8.98%
Change % Since Posting
8.69
Change Since Posting
96.69
Price When Posted

Metrics

86.94
Target Price
8/ 10
Confidence
1-2 Months
Timeframe
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