Marathon Petroleum Corp (MPC, Financial) has experienced a daily loss of -1.45% and a 3-month decline of -1.16%, with an impressive Earnings Per Share (EPS) of 26.78. Investors and analysts alike are keen to understand: is Marathon Petroleum fairly valued at its current market price? The following analysis delves into Marathon Petroleum's valuation, providing insights into its financial strength, profitability, growth prospects, and intrinsic value as determined by the GF Value.
Understanding Marathon Petroleum Corp (MPC, Financial)
Marathon Petroleum is a leading independent refiner, boasting a significant presence across the midcontinent, West Coast, and Gulf Coast of the United States. With a throughput capacity of 2.9 million barrels per day across its 13 refineries, the company is a major player in the oil and gas industry. Notably, its renewable diesel production capabilities, through facilities in Dickinson, North Dakota, and Martinez, California, underscore its strategic positioning within the renewable energy sector. Marathon Petroleum also manages a suite of midstream assets primarily via its listed master limited partnership, MPLX. Weighing the current stock price of $149.88 against the GF Value of $156.74, we set the stage for a comprehensive evaluation of Marathon Petroleum's fair market valuation.
The Essence of GF Value
The GF Value is a unique metric that captures the intrinsic value of a stock by integrating historical trading multiples, a GuruFocus adjustment factor, and future business performance projections. If Marathon Petroleum's stock price gravitates significantly above this value line, it may be considered overvalued, hinting at a potentially lower future return. Conversely, a price well below the line suggests undervaluation and the possibility of higher returns ahead. Currently, Marathon Petroleum (MPC, Financial) is regarded as fairly valued, implying that its stock price should align closely with the company's business growth rate over the long term.
Financial Strength of Marathon Petroleum
Investing in companies with robust financial strength mitigates the risk of capital loss. A prudent analysis of Marathon Petroleum's financial health, starting with its cash-to-debt ratio of 0.46, reveals that it lags behind 52.23% of its peers in the Oil & Gas industry. Despite this, the company's financial strength is deemed fair, with a GuruFocus ranking of 7 out of 10.
Profitability and Growth Prospects
Marathon Petroleum's consistent profitability over the last decade, coupled with its fair profitability rank of 7 out of 10, highlights its resilience. With a 12-month revenue of $151.90 billion and an operating margin of 10.02%, the company stands out in its sector. Moreover, its growth metrics are impressive, with a 3-year average annual revenue growth rate of 27.1% and an EBITDA growth rate of 60.9%, outperforming a majority of its industry counterparts.
ROIC vs WACC: A Key Indicator of Profitability
Comparing Marathon Petroleum's Return on Invested Capital (ROIC) at 20.11 to its Weighted Average Cost of Capital (WACC) at 6.21 reveals a company that effectively generates cash flow relative to its invested capital. This differential is a positive sign of Marathon Petroleum's ability to create value for its shareholders.
Concluding Thoughts on Marathon Petroleum's Valuation
Overall, Marathon Petroleum (MPC, Financial) is estimated to be fairly valued. The combined assessment of its financial condition, profitability, and growth prospects suggests a balanced opportunity for investors. The company's growth outperforms 87.88% of its industry peers, a promising sign for future performance. For a deeper dive into Marathon Petroleum's financials, one can explore 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.
