Exxon Mobil Corporation
NYSE : XOM
Sector: Energy
Industry: Oil & Gas - Integrated
FUNCTION:
Exxon Mobil Corporation, formerly named Exxon Corporation, was incorporated in 1882. The
Company's principal business is energy, involving the worldwide exploration, production,
transportation and sale of crude oil and natural gas and the manufacture, transportation and sale
of petroleum products. The Company also is a major worldwide manufacturer and marketer of
petrochemicals and participates in coal and minerals mining and electric power generation.
Exxon Mobil had revenues of $185.5 billion in 1999 compared to $169.6 billion in 1998.
On December 1, 1998, Exxon Corporation and Mobil Corporation signed an agreement to merge
the two companies. On November 30, 1999, pursuant to the agreement, a wholly owned
subsidiary of Exxon was merged with and into Mobil so that Mobil became a wholly owned
subsidiary of Exxon. At the same time, Exxon changed its name to Exxon Mobil Corporation.
Coincident with the merger, Exxon Mobil announced a new organization structure built on a
concept of 11 separate global businesses designed to allow the company to compete more
effectively in a changing worldwide energy industry. These include five global upstream
businesses (Exploration, Development, Production, Gas Marketing and Upstream Research),
four downstream businesses (Refining and Supply, Fuels Marketing, Lubricants and Petroleum
Specialties, and Technology), plus a Chemical company and a Coal and Minerals company.
During the first 11 months of 1999, in the United States and outside North America, Exxon's
activities were conducted, either directly or through affiliated companies. This included
exploration by Exxon Exploration Company, selected development activities by Exxon
Upstream Development Company, and producing and other development activities by Exxon
Company, U.S.A. and Exxon Company, International. In Canada, Exxon's exploration and
production activities were conducted by the Resources Division of Imperial Oil Limited, which
is 69.6% owned by Exxon Mobil.
Effective December 1, 1999, after the merger of Exxon and Mobil was completed, Exxon
Mobil's activities were conducted, either directly or through affiliated companies. This includes
exploration by Exxon Mobil Exploration Company, selected development activities by Exxon
Mobil Development Company, and producing and other development activities by Exxon Mobil
Production Company. Activities conducted by Imperial Oil Limited and Aera remained the same.
Exxon Mobil Corporation is engaged in the exploration, production, manufacture, transportation
and sale of crude oil, natural gas, and petroleum products, and the manufacture of petrochemicals,
packaging films and specialty chemicals. For the nine months ended 9/30/00, revenues rose 29%
to $168.89B. Net income before extra. item applicable to Common totaled $12.5B, up from
$5.63B. Results reflect increased crude oil and natural gas prices.
Fundamental Analysis:
A-Valuation
Ratio
DDM
P/E
Company
Industry
Sector
Comparison
Not Applicable1
22.83
19.77
27.84
PEG
1.61
5.972
PSR
1.42
1.26
2.26
P/B
4.66
4.14
3.90
P/Eco>P/EInd.
Exxon-Mobile’s P/E Ratio is higher than the
industry indicating that the company is overvalued.
With comparison to the sector, Exxon-Mobile is
undervalued.
PEGco<PEGInd.
Exxon-Mobile’s PEG Ratio is lower than the
industry indicating that the company is
undervalued.
PRSco<PSRInd. and PSRSec.
Exxon-Mobile’s PSR is not higher than 3,
therefore the company is undervalued. However,
it is also lower than the industry and the sector.
PBco>1 which indicates that the company is
overvalued, but it is in the same range as the
industry and the sector.
Conclusion of Equity Valuations:
Comparison of the P/E, PSR and PEG indicate that Exxon-Mobile is relatively
undervalued compared to the industry and the sector. However, P/B shows the strength of the
company since its establishment.
1
The Market guide does not post a value for a beta, therefore, the constant growth cannot be properly calculated.
2
Take P/E of the industry divided by 5 years % growth of EPS
A-Financial Analysis
Category
Ratio
Company
Industry
Sector
Comparison
1GROWTH
RATE
5 years
Growth of
Sales
5 years
Growth of
EPS
Operating
Margin
.46
.86
7.31
3.31
4.37
4.91
8.78
9.79
11.94
Net Profit
Margin
6.19
6.43
7.60
Effective
Tax Rate
38.72
39.99
37.72
ROA
9.63
9.63
7.65
ROI
13.07
12.83
9.93
ROE
21.47
22.55
18.66
Receivable
Turnover
11.78
12.15
10.29
Inventory
Turnover
15.32
17.81
18.47
Asset
Turnover
1.56
1.53
1.23
The sales growth of the
Exxon-Mobile is not as high as
the industry and the sector.
The EPS growth of the ExxonMobile is not as high as the
industry and the sector.
The operating profit margin of
Exxon-Mobile is slightly
lower than the industry and the
sector.
The Net Profit Margin of
Exxon-Mobile is relatively
close to the industry and lower
than the sector.
Exxon-Mobile is able to
manage its taxes just as well as
the industry and the sector.
The return on asset of ExxonMobile is the same the
industry and higher than the
sector.
The return on investment of
Exxon-Mobile is substantially
higher than the industry and
the sector.
The return on equity of ExxonMobile is slightly lower than
the industry and higher than
the sector.
The receivable turnover of
Exxon-Mobile is slightly
lower than the industry and
higher than the sector. This
indicates that Exxon-Mobile
collects its receivables as well
as the industry and better than
the sector.
The inventory turnover of
Exxon-Mobile is lower than
the industry and the sector.
The asset turnover of ExxonMobile is higher than industry
and the sector. This indicates
that the company utilizes its
assets better than the industry
and the sector.3
2PROFITABILITY
RATIO
3MANAGEMENT
EFFECTIVENESS
4EFFICIENCY
RATIO
3
Watch for the cash flow.
A-Financial Analysis continued
Category
Ratio
Company
Industry
Sector
Comparison
5DEBT RATIO
Total
Debt/Equity
.22
.35
.55
The debt/equity ratio of
Exxon-Mobile is not as high as
the industry and the sector.
This indicates that ExxonMobile is not as leveraged as
the industry and the sector.
Total
Debt/Assets
Interest
Coverage
Ratio
.10
28.39
23.88
16.90
Quick Ratio
.68
.69
.95
Current Ratio
.96
.98
1.36
The interest coverage ratio of
Exxon-Mobile is higher than
the industry and the sector.
This indicates that ExxonMobile can meet its fixed
obligations better than the
industry and the sector.
The quick ratio of ExxonMobile is just as high as the
industry and lower than the
sector. This indicates that
Exxon-Mobile is as liquid as
the industry and not as liquid
the sector.
The current ratio of ExxonMobile is very close to the
industry and not as high as the
sector. This indicates that
Exxon-Mobile is as liquid as
the industry and not as liquid
as the sector.
6LIQUIDITY
RATIO
Conclusion of Financial Strength:
Exxon Mobile has a great financial potential in the areas of profitability and growth.
Exxon Mobile proves to be competitive within its industry and sector coming very close to
industry and sector averages in several areas. Exxon Mobile’s high levels of efficiency and low
level of debt enable it to have a substantial capacity for growth. If Exxon Mobile can continue
to grow in these areas and improve in its sales and EPS, there is a great potential for full potential
strength.
Technical Analysis:4
1-Relative Strength Index:
The Relative Strength Index ("RSI") is a popular oscillator. The name "Relative
Strength Index" is slightly misleading as the RSI does not compare the relative strength of two
securities, but rather the internal strength of a single security. The RSI is a price-following
oscillator that ranges between 0 and 100. A popular method of analyzing the RSI is to look for a
divergence in which the security is making a new high, but the RSI is failing to surpass its
previous high. This divergence is an indication of an impending reversal. When the RSI then
turns down and falls below its most recent trough, it is said to have completed a "failure swing."
The failure swing is considered a confirmation of the impending reversal. Movements above 70
are considered overbought, while an oversold condition would be a move under 30.
Figure 1: Exxon Mobile compared to the Market
Interpretation:
Exxon Mobile is going in the opposite direction of the market. Its level of relative
strength falls well above 70. This indicates that the stock is overbought. This would not be an
opportune time to buy.
Figure 2: Exxon Mobile compared to NYSE
4
Exxon Mobile is the number one company in their industry therefore only 2 figures will be depicted within the
analysis.
Interpretation:
Exxon Mobile has a history of following the trend of the market. However, they are
currently outperforming the market. Since the trend seems to be taking an upward turn, this
indicates that the stock is overbought. This verifies that it is not a good time to buy.
2-Bollinger Bands:
Bollinger Bands are similar to moving average envelopes. The difference between
Bollinger Bands and envelopes is envelopes are plotted at a fixed percentage above and below a
moving average, whereas Bollinger Bands are plotted at standard deviation levels above and
below a moving average. Since standard deviation is a measure of volatility, the bands are selfadjusting: widening during volatile markets and contracting during calmer periods.
Bollinger Bands are usually displayed on top of security prices, but they can be displayed
on an indicator. These comments refer to bands displayed on prices. As with moving average
envelopes, the basic interpretation of Bollinger Bands is that prices tend to stay within the upperand lower-band. The distinctive characteristic of Bollinger Bands is that the spacing between the
bands varies based on the volatility of the prices. During periods of extreme price changes (i.e.,
high volatility), the bands widen to become more forgiving. During periods of stagnant pricing
(i.e., low volatility), the bands narrow to contain prices.
Figure 1: Exxon Mobile compared to Market
Interpretation:
Exxon Mobile currently falls within the Bollinger Band. This indicates that the stock is
neither positively or negatively extended. Since the Bollinger Band widths are not very wide,
this indicates that there is not much volatility in the price of the stock. However, since Mobile
Exxon falls within the Bollinger Band, this indicates a time to HOLD the stock since there is
great potential for price growth.
Figure 2: Exxon Mobile compared to NYSE
Interpretation:
The NYSE and Exxon Mobile seem to have a close historical trend. However, recent
performance indicates that the NYSE is overextended in a downward motion. This indicates that
it is an opportune time to BUY within the market and HOLD the Exxon Mobile stock.
3-Moving Average:
A Moving Average is an indicator that shows the average value of a security's price over
a period of time. When calculating a moving average, a mathematical analysis of the security's
average value over a predetermined time period is made. As the security's price changes, its
average price moves up or down.
There are five popular types of moving averages: simple (also referred to as arithmetic),
exponential, triangular, variable, and weighted. Moving averages can be calculated on any data
series including a security's open, high, low, close, volume, or another indicator. A moving
average of another moving average is also common.
The only significant difference between the various types of moving averages is the
weight assigned to the most recent data. Simple moving averages apply equal weight to the
prices. Exponential and weighted averages apply more weight to recent prices. Triangular
averages apply more weight to prices in the middle of the time period. And variable moving
averages change the weighting based on the volatility of prices.
The most popular method of interpreting a moving average is to compare the relationship
between a moving average of the security's price with the security's price itself. A buy signal is
generated when the security's price rises above its moving average and a sell signal is generated
when the security's price falls below its moving average.
Figure 1: Exxon Mobile compared to the Market
Interpretation:
Since the closing prices of Exxon Mobile move above the market, there is an indication
to BUY at this time.
Figure 2: Exxon Mobile compared to the NYSE
Interpretation:
Since the closing prices of Exxon Mobile are above the NYSE, there is an indication to
BUY at this time.
4-Volume Analysis:
The Cumulative Volume Index ("CVI") is a market momentum indicator that shows
whether money is flowing into or out of the stock market. It is calculated by subtracting the
volume of declining stocks from the volume of advancing stocks, and then adding this value to a
running total.
The CVI and OBV (On Balance Volume) are quite similar. Many computer programs and
investors incorrectly call the OBV the CVI. OBV, like the CVI, was designed to show if volume
is flowing into or out of the market. But, because up-volume and down-volume are not available
for individual stocks, OBV assumes that all volume is up-volume when the stock closes higher
and that all volume is down-volume when the stock closes lower. The CVI does not have to
make this large assumption, because it can use the actual up- and down-volume for the New
York Stock Exchange.
One useful method of interpreting the CVI is to look at its overall trend. The CVI shows
whether there has been more up-volume or down-volume and how long the current volume trend
has been in place. Also, look for divergences that develop between the CVI and a market index.
For example, is the market index making a new high while the CVI fails to reach new highs? If
so, it is probable that the market will correct to confirm the underlying story told by the CVI.
Figure 1: Exxon Mobile compared to the Market
Interpretation:
The volume index of Exxon Mobile is rising in relation to the Market. This indicates that
the number of investors of the stock are increasing. This verifies that it is not an opportune time
to buy at this.
Figure 2: Exxon Mobile compared to the NYSE
Interpretation:
Exxon Mobile has a greater volume of investors in proportion to the NYSE. This
indicates that it is not a good time to buy the stock at this time.
Conclusion of the Technical Analysis:
Exxon Mobile is not at the best point to purchase at this time. The technical analysis
demonstrates the growing popularity of the stock. This indicates that it is a better time to HOLD
the stock at this point.
RECOMMENDATION:
Exxon Mobile has BUY recommendation as of November 15, 2000 because it is
undervalued and has a great potential to full financial strength. The technical analysis indicates
that it is a good time to HOLD the stock at the time. However, both analyses indicate that the
stock has a positive growing performance. According to the Market Guide Analysts, there is a
somewhat balanced recommendation between BUY and HOLD (6/29 Strong Buy, 10/29 Buy,
11/29 Hold).