Marathon Petroleum Corp (MPC, Financial) recently experienced a daily loss of 4.27%, yet it has seen a modest 3-month gain of 1.16%. With an Earnings Per Share (EPS) of 20.02, investors are keen to determine if the stock is fairly valued. This analysis delves into Marathon Petroleum's current market valuation, encouraging readers to explore the intricate details of its financial standing and future prospects.
Company Overview
Marathon Petroleum, a leading independent refiner, operates 13 refineries across the midcontinent, West Coast, and Gulf Coast of the United States, with a total throughput capacity of 3.0 million barrels per day. The company also ventures into renewable diesel production with facilities in North Dakota and California. Additionally, Marathon Petroleum manages midstream assets primarily through its listed master limited partnership, MPLX. A pivotal aspect of understanding its stock value is comparing its current price of $170.26 to the GF Value of $161.49, which suggests the stock might be closely aligned with its fair market value.
Understanding GF Value
The GF Value is a unique valuation approach that estimates the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor, and future business performance forecasts. For Marathon Petroleum, the GF Value suggests a fair valuation, indicating that the stock price should ideally hover around this value. Currently priced at $170.26, with a market cap of $60 billion, Marathon Petroleum appears to be trading close to its intrinsic value, suggesting that its future returns could align closely with its business growth.
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Financial Strength and Stability
Before investing, assessing a company's financial health is crucial. Marathon Petroleum's cash-to-debt ratio stands at 0.27, slightly below the industry median, suggesting moderate financial risk. The company's overall financial strength is rated 6 out of 10, reflecting a fair balance between debt management and cash reserves.
Profitability and Growth Potential
Marathon Petroleum has demonstrated consistent profitability, with a 10-year track record of financial gains. In the past year alone, the company achieved a revenue of $146.20 billion and maintained an operating margin of 6.83%. While these figures are impressive, the company's growth rate over the past three years has been stagnant, which could be a concern for future valuation.
Investment Efficiency: ROIC vs. WACC
Another vital metric is the comparison between the Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC). Marathon Petroleum's ROIC is 13.47, significantly higher than its WACC of 6.87, indicating efficient capital management and promising shareholder returns.
Conclusion
Marathon Petroleum's stock appears to be fairly valued, reflecting its current financial health and market position. While the company shows robust profitability and efficient capital use, its stagnant growth rate could be a potential red flag for future performance. For a deeper dive into Marathon Petroleum's financials, consider exploring 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.
