Select Page

My first value stock pick is Exxon Mobil (NYSE: XOM). Exxon has been beaten down. Demand for oil as collapsed as a result of the 2020 lockdown crisis and resultant economic contraction. It is trading near it’s March 23rd low (which was $33.11) and is currently trading at $33.50 as of writing.

I believe the demand for oil will return eventually. The oil industry is at risk from political movements in the west calling for a move away from fossil fuels but realistically oil will be used to meet global energy needs for decades to come both in the west as well as India and China. Given the metrics I think XOM is a good long term stock to own.

The analysis is based on my Value Investing Metrics

1) Enterprise Value to Market Capitalization (EV/Market Cap)

XOM has an EV/Market Cap of 1.4.

2) Enterprise Value to Free Cash Flow (EV/FCF)

TTM XOM had free cash flow of -1.65 billion. In 2019 it was 5.36 billion. So while right  now XOM fares very poorly when the demand for oil returns it should perform well there.

3) Enterprise Value to Earnings Before Interest and Tax (EV/EBIT)

XOM comes in at 19.36 here. 

4) Operating Margin

Currently 1.97% which isn’t stellar however, it is better than comparable companies (listed below).

5) Dividend Yield

Currently 10.42% which is great. However, it is likely XOM will cut its dividend. So I’m not buying XOM for the dividend. If they keep it great but if not that is okay too.

6) Return on Equity (ROE)

ROE is 3.86% and the 5-year ROW is 8.28%

Here is Exxon Mobil (XOM) compared to Chevron (NYSE: CVX) and Royal Dutch Shell (NYSE: RDS.B). While the other oil giants fare better on some metrics XOM has not bounced back from the march lows the way the others have.

An investment XOM is a bet that the global demand for oil rebounds. XOM is currently a good value. While it could go lower I think at a price of $33.50 it is attractive. 

As always you should do your own research and make your own investment decisions. This article is not a recommendation to buy or sell a security.

As a disclaimer I own shares of XOM and could buy more in the future.

My second value stock pick will be shared with subscribers of my email newsletter.

You can look at the performance of my past stock picks.