Exxon Mobil Is Significantly Overvalued
Benjamin Graham taught that intelligent investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk. This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company, or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – July 2016 . By using the ModernGraham method , one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries. What follows is a stock analysis showing a specific look at how Exxon Mobil Corporation ( XOM ) fares in the ModernGraham valuation model.
Downloadable PDF version of this valuation:
ModernGraham Valuation of XOM – August 2016
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
What kind of Intelligent Investor are you?
| Defensive Investor; must pass 6 out of the following 7 tests. | AA | AA | ||
| AA | 1. Adequate Size of the Enterprise | Market Cap > $2Bil | $369,475,369,935 | Pass |
| AA | 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 0.89 | Fail |
| AA | 3. Earnings Stability | Positive EPS for 10 years prior | AA | Pass |
| AA | 4. Dividend Record | Dividend Payments for 10 years prior | AA | Pass |
| AA | 5. Earnings Growth | Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end | -33.07% | Fail |
| AA | 6. Moderate PEmg Ratio | PEmg | 18.53 | Pass |
| AA | 7. Moderate Price to Assets | PB Ratio | 2.18 | Pass |
| AA | AA | AA | AA | AA |
| AA | AA | AA | AA | AA |
| Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor. | AA | AA | ||
| AA | 1. Sufficiently Strong Financial Condition | Current Ratio > 1.5 | 0.89 | Fail |
| AA | 2. Sufficiently Strong Financial Condition | Debt to NCA | -5.20 | Fail |
| AA | 3. Earnings Stability | Positive EPS for 5 years prior | AA | Pass |
| AA | 4. Dividend Record | Currently Pays Dividend | AA | Pass |
| AA | 5. Earnings Growth | EPSmg greater than 5 years ago | AA | Fail |
Stage 2: Determination of Intrinsic Value
| EPSmg | $4.80 |
| MG Growth Estimate | -4.25% |
| MG Value | $0.00 |
| Opinion | Overvalued |
| MG Grade | C |
| MG Value based on 3% Growth | $69.59 |
| MG Value based on 0% Growth | $40.79 |
| Market Implied Growth Rate | 5.01% |
| Current Price | $88.91 |
| % of Intrinsic Value | N/A |
Exxon Mobil Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio andAA insufficient earnings growth over the last ten years. The Enterprising Investor has concerns regarding the level of debt relative to the current assetsAA and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.
As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) decline from $7.83 in
EXPD 15-Year Financial Data
The intrinsic value of EXPD
Peter Lynch Chart of EXPD
Warning! GuruFocus has detected 3 Warning Sign with FISI. Click here to check it out.
FISI 15-Year Financial Data
The intrinsic value of FISI
Peter Lynch Chart of FISI
Warning! GuruFocus has detected 6 Warning Signs with QCOM. Click here to check it out.
QCOM 15-Year Financial Data
The intrinsic value of QCOM
Peter Lynch Chart of QCOM
Warning! GuruFocus has detected 9 Warning Signs with XOM. Click here to check it out.
XOM 15-Year Financial Data
The intrinsic value of XOM
Peter Lynch Chart of XOM
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