As part of our ongoing 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 world’s largest energy giants, Exxon Mobil Corporation (XOM).
Profile
Exxon Mobil (XOM) is a leading global oil and gas company, engaged in the exploration, production, refining, and marketing of petroleum products. With upstream, downstream, and chemical operations in over 60 countries, XOM remains a cornerstone of the global energy infrastructure. The firm has also begun investing in carbon capture and low-emission technologies, positioning itself for the evolving energy transition. Its scale, integration, and operational efficiency help drive strong cash flows across commodity cycles.
DCF Analysis
Inputs
- Discount Rate: 8.0%
- Terminal Growth Rate: 2.0%
- WACC: 7.5%
Forecasted Free Cash Flows (FCFs) in billions
| Year | FCF | Present Value |
|---|---|---|
| 2025 | 38 | 35.14 |
| 2026 | 40 | 34.52 |
| 2027 | 42 | 33.76 |
| 2028 | 44 | 32.87 |
| 2029 | 46 | 31.87 |
Total Present Value of FCFs = 168.16 billion
Terminal Value Calculation
Using the perpetuity growth model:
Terminal Value = (46 × 1.02) / (0.08 – 0.02)
Terminal Value = 46.92 / 0.06 = 782.00 billion
Present Value of Terminal Value = 782.00 / (1.08^5)
PV of Terminal Value = 782.00 / 1.4693 = 532.18 billion
Enterprise Value Calculation
Enterprise Value = PV of FCFs + PV of Terminal Value
Enterprise Value = 168.16 + 532.18 = 700.34 billion
Net Debt Calculation
Net Debt = Total Debt – Cash
Net Debt = 41.71 – 23.03 = 18.68 billion
Equity Value Calculation
Equity Value = Enterprise Value – Net Debt
Equity Value = 700.34 – 18.68 = 681.66 billion
Per-Share DCF Value
Shares Outstanding = 4,353.09454 million = 4.35 billion
Per-Share DCF Value = 681.66 / 4.35 = $156.69
Conclusion
DCF Value: $156.69
Current Price: $109.31
Margin of Safety: +30.23%
Based on our DCF valuation, Exxon Mobil (XOM) appears undervalued. The estimated DCF value of $156.69 is well above the current share price of $109.31, implying a margin of safety of approximately 30.23%.
For all the latest news and podcasts, join our free newsletter here.
Don’t forget to check out our FREE Large Cap 1000 – Stock Screener, here at The Acquirer’s Multiple:
