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Exxon Mobil: Great Companies Can Be Overvalued (Rating Downgrade)

May 15, 2023 6:40 PM ETExxon Mobil Corporation (XOM)11 Comments


  • Exxon Mobil Corporation is a great company with an impressive and low-cost portfolio of assets and substantial diversification.
  • However, being a great company doesn't stop Exxon Mobil from being overvalued, the company's profits are single-digits at 80+% Brent.
  • Overall, the company simply doesn't have the profit to justify its lofty valuation, it's overvalued at this time and a poor investment.
  • We're currently running a sale for our private investing group, The Retirement Forum, where members get access to portfolios, market alerts, real-time chat, and more. Learn More »

ExxonMobil"s Baton Rouge Refinery, Louisiana, USA


Exxon Mobil Corporation (NYSE:XOM), aka ExxonMobil, is the second-largest publicly traded oil company in the world, and the largest non-primarily state-owned one, with a market capitalization of roughly $425 billion. Despite the company's large size and low margin, its share price has

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The Value Portfolio specializes in building retirement portfolios and utilizes a fact-based research strategy to identify investments. This includes extensive readings of 10Ks, analyst commentary, market reports, and investor presentations. He invests real money in the stocks he recommends.

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Comments (11)

Erik Poole profile picture
Benchmark oil prices may further dip as the US heads into recession and the entire sector may trade lower as a result.

Otherwise, Exxon looks like the best integrated oil and gas, bond-proxy buy and hold pick on the menu. As others have pointed out, the high netback production growth and potential future growth in the Guyana-Suriname offshore basin has been and still looks stellar.

I do not happen to personally own but for many investor risk preference types, Exxon is an excellent choice. For those who went in big or added significantly in late 2020, I hope you exercised some portfolio discipline and significantly trimmed.

From what I observe, Exxon is a terrific corporate citizen and excels in ESG. This matters in North America and matters even more so in poor developing countries typically characterized by a weaker state and a far more fragile socio-political consensus. I would not hesitate to have Exxon operate in my backyard, Imperial Oil's leakage issues in northern Alberta notwithstanding.
If I say to you that oil will cost 400-600$ on the horizon of 10 years - how does the price of XOM and other oil stocks will look like now?😎 can you believe in such scenario? Everyone was laughing when it was negative during Covid - my bet most will cry when it goes in stratosphere…. You will bite your elbows remembering this BS on XOM valuation 🤡
Orion1963 profile picture
1.) If you believe the IEA, EIA, & The House of Saud oil statistician's, worldwide oil use is increasing for decades, as 7 billion souls in the developing world increase their per/capita fossil fuel use.

2.) There has been a dearth of oil exploration since the oil price collapse in 2014.

3.) XOM is the only Super Major to have invested heavily in 'hydrocarbon' CapX since 2014. Resulting in Guyana's >11 billion known recoverable (low lifting cost) oil.

So, if you disagree with the reality that 7 billion people in the developing world will be using more fossil fuels, as they pull themselves out of poverty, yes, sell XOM.

For me, XOM is 98% of my retirement and I'm dollar cost averaging every month; the bull market in oil/gas can't end without massive production increases and that will not happen, for too many reasons to list here.

Right on Cue: 5-16-23 update.

"The world’s oil demand is set to rise by 2.2 million barrels per day (bpd) this year to a record 102 million bpd, the International Energy Agency (IEA) said on Tuesday, revising up its forecast by 200,000 bpd as China’s demand hit a record."
bet727 profile picture
Absolute drivel!
Oil prices may be coming down along with record profits however it cannot be understated in terms of what management did to put its financial future in order.
Net debt of approximately 68 billion dollars has be reduced to a very manageable level. Cash in the amount of 32.4 billion has been accumulated for tougher times, further buybacks or a timely acquisition. Approximately 20 billion dollars in stock has been retired amounting to close to 200 million shares with 30 billion more remaining. Cost synergies continue to lower the break even cost of oil and prudent exploration and investment have unleashed discoveries of vast amounts of recoverable fossil fuels. Exxon is producing 300,000 more barrels of oil while its competitors are producing less. These accomplishments lend toward holding on to the stock.
bet727 profile picture
@Jlexus1953 You understand XOM better than the author. XOM is best of breed.
@bet727 Fang, PXD, XOM!! The 3 amigos of OIL!! EOG if you need 1 more!!!
Oil Can profile picture
Actually not overvalued at all.

$XOM will earn a little better than $10 (EPS) this year and typically trades - like most oil cyclicals - at about 10x earnings.

Right in line.
There's a (very) old Henny Youngman joke:
Question: "How's your wife?"
Reply: "Compared to what?"

That's the problem with articles like this. They simply state that 8-10% annual returns are not good enough. Compared to what?

8% doubles your money in 9 years. 10% in 7 years. O&G are going to be around for decades. Emerging economies are going to demand more energy to improve their standards of living. All forecasts agree it won't be met by wind and solar - they remain relatively small even while they grow rapidly. The O&G industry is underinvesting to meet those energy demands - and existing supply declines at 4-6%, maybe more, a year. Prices must rise to justify the investments needed to meet demand. So the future is reasonably predictable. Especially for well positioned companies like XOM and CVX.

I'll have some respect for articles like this when they disclose the alternate investments they prefer to XOM et. al. And why?

Compared to what?
Author probably shorted the stock…most authors are just pushing their “book”. If there’s even a stock to hold indefinitely it’s XOM
Lol It is amazing that throwing darts have a better percentage than articles like this lol
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