As part of a new series, each week we typically conduct a DCF on one of the companies in our screens. This week we thought we’d take a look at one of the stocks that are not currently in our screens, Exxon Mobil Corp (XOM).
Profile
ExxonMobil is an integrated oil and gas company that explores for, produces, and refines oil around the world. In 2022, it produced 2.4 million barrels of liquids and 8.3 billion cubic feet of natural gas per day. At the end of 2022, reserves were 17.7 billion barrels of oil equivalent, 65% of which were liquids. The company is the world’s largest refiner with a total global refining capacity of 4.6 million barrels of oil per day and is one of the world’s largest manufacturers of commodity and specialty chemicals.
Recent Performance
Over the past twelve months the share price is down 11.71%.
Inputs
- Discount Rate: 7.8%
- Terminal Growth Rate: 2%
- WACC: 7.8%
Forecasted Free Cash Flows (FCFs)
| Year | FCF (billions) | PV(billions) |
| 2024 | 31.42 | 29.15 |
| 2025 | 36.21 | 31.16 |
| 2026 | 41.73 | 33.31 |
| 2027 | 48.09 | 35.61 |
| 2028 | 55.42 | 38.07 |
Terminal Value
Terminal Value = FCF * (1 + g) / (r – g) = 974.63 billion
Present Value of Terminal Value
PV of Terminal Value = Terminal Value / (1 + WACC)^5 = 669.49 billion
Present Value of Free Cash Flows
Present Value of FCFs = ∑ (FCF / (1 + r)^n) = 167.30 billion
Enterprise Value
Enterprise Value = Present Value of FCFs + Present Value of Terminal Value = 836.79 billion
Net Debt
Net Debt = Total Debt – Total Cash = 165.41 billion
Equity Value
Equity Value = Enterprise Value – Net Debt = 671.38 billion
Per-Share DCF Value
Per-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $166.80
Conclusion
| DCF Value | Current Price | Margin of Safety |
|---|---|---|
| $166.80 | $102.43 | 38.59% |
Based on the DCF valuation, the stock is undervalued. The DCF value of $166.80 per share is higher than the current market price of $102.43. The Margin of Safety is 38.59%%.
It is important to note that this valuation is based on a number of assumptions, and these assumptions could change in the future. This valuation is meant to be a back-of-the-envelope analyse that could be used as a starting point in a much more thorough valuation process. As a result, it is important to do your own research before making any investment decision.
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