With shares of Exxon Mobil (NYSE:XOM) trading at around $89.58, is XOM an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
Investors love to talk about huge gains. Whenever you listen to an investor brag about a home run, keep in mind that he’s likely excited because he’s a gambler who constantly needs action. Therefore, there’s a good chance that he also has many large losses. It’s the quiet guy who listens who is more likely to own shares in a company like Exxon Mobil. There is no outward excitement because this isn’t a gamble. It’s a steady climb toward increased wealth. In a way, gains are fully expected. Therefore, there is no reason to get excited.
The latest news is that Exxon Mobil began knowingly adding an environmentally harmful chemical to gasoline in 1984. Really? While this is terrible for the company to have participated in, from an investing standpoint, it should have no bearing on your decision. Yes, there is an $800 million trial, but keep in mind that Exxon Mobil has over $53 billion in operating cash flow. If the stock drops in any way, shape, or form due to this news, then it would be a good opportunity to pounce.
Exxon Mobil produced 2.4 million barrels of oil and 12.1 billion cubic feet of natural gas per day in 2011. In addition to that, this is a company that is constantly exploring and expanding. For more information in this regard, look at the company’s press releases.
Now let’s take a look at the most important numbers for Exxon Mobil.
E = Equity to Debt Ratio Is Strong
The debt-to-equity ratio and balance sheet for Exxon Mobil are strong.
T = Technicals on the Stock Chart Are Strong
When you own Exxon Mobil, you shouldn’t expect wild swings in the stock price. If you want to gamble, own a big bank or a biotech. If you want steady returns where you don’t have to worry about government policies or other exterior circumstances, then this should be one of your first choices. In regards to performance on a competitive basis over a three-year timeframe, Exxon Mobil has outperformed ConocoPhillips (NYSE:COP), but underperformed Chevron Corporation (NYSE:CVX).
At $89.58, Exxon Mobil is currently trading above all its averages.
E = Earnings and Revenue Have Been Steady
Revenue and earnings have been improving since 2009. Also keep in mind that this is one of the most profitable companies on the planet.
When we look at last quarter on a YoY basis, we see a slight decrease in revenue and earnings, but this shouldn’t rattle any potential investor.
T = Trends Support the Industry
Consistently low natural gas prices have hampered the industry’s potential. Everyone keeps calling for a natural gas boom, but that has been the case for how many years now? As far as oil goes, demand will always be there. Try to find a Major Integrated Oil & Gas company that has performed poorly throughout its existence. You won’t find one. The trend will remain intact, and these companies will continue to deliver steady returns.
Exxon Mobil is a money-making machine. It has a profit margin of 10.40 percent, an ROE of 28.16 percent, and an operating cash flow that exceeds $53 billion. In regards to valuation, the Trailing P/E is 9.47, and the Forward P/E is 11.32. When it comes to analysts, there are 10 on the Buy side, 13 on the Hold side, and zero on the Sell side. And let’s add on a 2.50 percent yield as a bonus. What’s not to love? Any serious long-term investor should be salivating.
Exxon Mobil is a long-term OUTPERFORM.
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