Exxon Mobil touching Pre-COVID low prices | Fundamentals/TechnicDisclaimer: I am not a FINANCIAL advisor as this is just my own due diligence. It is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered legal practitioner or financial or investment adviser.
Exxon Mobil and other OIL giants regardless if they're midstream, upstream, lowstream oil companies, has been one of the industries that has underperformed the market for a LONG time.
Technicals:
As seen in the chart, there's good reason for XOM to hold this support level (highlighted in green) and as of right now, there's a major confluence area with the support level and the 200 EMA: ohlc4.
The only thing that we're looking for, in XOM is for the RSI to break-through 50.
Not only that, but when we cross-reference USOIL/XOM it's currently hovering above 1.2:
USOIL/XOM
What this chart tells us is if XOM's percentage change is any different to USOIL's percentage change. Historically speaking, USOIL/XOM has only ever been below 0.5-0.9 which is a sign that XOM always overpowers USOIL's percentage change (This has been consistent ever since 2015)
It has been traded at a very unfair price in proportion to WTI and USOIL and that shows on the USOIL/XOM ratio
Now time for the fundamentals, the main bullish thesis for XOM:
Exxon has repeatedly and consistently beat earnings for the past FOUR quarters and none of those earnings beat have been less than a 5% beat. With a consistent trend of beating earnings, Exxon could be on the horizon of breaking through Pre-COVID lows .
Not only that, but during the recession, the company has done tremendous work on restructuring the company and have been working on increasing operating and profit margins for the past year which is evident through the layoffs that have been occuring for the company and the smart tactic of halting off employee retirement accounts in order to address short-term issues
You're maybe wondering:
"It could be because they missed on Revenues which is why they aren't seeing as much growth progress on the stock"
Nope!
Exxon has outperformed in terms of Earnings AND Revenue, for the past 2 quarters, they have beaten revenues by nearly $3 billion to $5 billion. Even back in Q1 of 2021 (February) Even they missed revenues by $1-$2 billion approximately yet the stock price rallied.
Now, it shouldn't be the case that a stock should trade at X based on earnings, but what I'm trying to say is that if the trend of beating earnings and revenue estimates continue and go on until 2022, Exxon could be fairly traded at a price of $75-$80 based on the margins, estimates, etc.
We could apply an exit multiple and, based on my spreadsheet, Exxon should be trading based on all of these multiples (Based on estimates):
2021
fair val. ev/ebitda $141.37
fair val. ev/ebit $81.25
fair val. ev/s $67.37
fair val. p/e $74.56
fair val. p/s $72.09
average $87.33
median $74.56
Also, not to mention, the average expected price for Exxon matches up by adding a 2018/2021E ratio as 2021 estimates are currently trading at nearly the exact same cash flows and EPS with EBITDA estimates matching up more than 2018 EBITDA (Except for EBIT as 2018 EBIT is higher than expected 2021 EBIT).
That's all for my analysis, for those wondering how the above calculations work, it only works on companies that do not dilute outstanding shares or buyback those same shares.
It's basically an exit multiple.
That's all, goodbye!
