Marathon Petroleum Corp (MPC, Financial) experienced a daily gain of 3.4%, with a 3-month gain of 14.82%. Its Earnings Per Share (EPS) stands at 27.56. The question we aim to answer with this analysis is: Is the stock modestly overvalued? This article provides a detailed valuation analysis of Marathon Petroleum. We encourage you to read on for a comprehensive understanding of the company's value.
Introduction to Marathon Petroleum Corp
Marathon Petroleum is an independent refiner with 13 refineries scattered across the midcontinent, West Coast, and Gulf Coast of the United States. The company boasts a total throughput capacity of 2.9 million barrels per day. Its Dickinson, North Dakota, facility produces 184 million gallons a year of renewable diesel, and its Martinez, California, facility is expected to produce 730 million gallons a year of renewable diesel once converted. Marathon Petroleum also owns and operates midstream assets primarily through its listed master limited partnership, MPLX.
Here is the income breakdown of Marathon Petroleum:
An Overview of GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. The GF Value Line on our summary page provides an overview of the fair value that the stock should ideally be traded at. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
Marathon Petroleum (MPC, Financial) stock appears to be modestly overvalued based on the GuruFocus Value calculation. At its current price of $156.4 per share, Marathon Petroleum has a market cap of $62.50 billion. Because Marathon Petroleum is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth.
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Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, investors must carefully review a company's financial strength before deciding whether to buy shares. Marathon Petroleum has a cash-to-debt ratio of 0.4, which ranks worse than 55.31% of 1036 companies in the Oil & Gas industry. Based on this, GuruFocus ranks Marathon Petroleum's financial strength as 7 out of 10, suggesting a fair balance sheet.
This is the debt and cash of Marathon Petroleum over the past years:
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Marathon Petroleum has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $156.80 billion and Earnings Per Share (EPS) of $27.56. Its operating margin is 10.44%, which ranks better than 54.1% of 989 companies in the Oil & Gas industry. Overall, the profitability of Marathon Petroleum is ranked 7 out of 10, which indicates fair profitability.
The average annual revenue growth of Marathon Petroleum is 27.1%, which ranks better than 79.84% of 863 companies in the Oil & Gas industry. The 3-year average EBITDA growth is 60.9%, which ranks better than 87.55% of 827 companies in the Oil & Gas industry.
ROIC vs WACC
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Marathon Petroleum's return on invested capital is 21.62, and its cost of capital is 8.75.
The historical ROIC vs WACC comparison of Marathon Petroleum is shown below:
Conclusion
In short, the stock of Marathon Petroleum (MPC, Financial) appears to be modestly overvalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 87.55% of 827 companies in the Oil & Gas industry. To learn more about Marathon Petroleum stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
