Stock Analysis on Net
Stock Analysis on Net

Exxon Mobil Corp. (NYSE:XOM)

Present Value of Free Cash Flow to Equity (FCFE)

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Exxon Mobil Corp., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

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Year Value FCFEt or Terminal value (TVt) Calculation Present value at 13.28%
01 FCFE0 33,211
1 FCFE1 34,333 = 33,211 × (1 + 3.38%) 30,308
2 FCFE2 35,714 = 34,333 × (1 + 4.02%) 27,831
3 FCFE3 37,380 = 35,714 × (1 + 4.67%) 25,714
4 FCFE4 39,365 = 37,380 × (1 + 5.31%) 23,905
5 FCFE5 41,709 = 39,365 × (1 + 5.95%) 22,359
5 Terminal value (TV5) 603,103 = 41,709 × (1 + 5.95%) ÷ (13.28% – 5.95%) 323,306
Intrinsic value of Exxon Mobil Corp. common stock 453,423
 
Intrinsic value of Exxon Mobil Corp. common stock (per share) $114.27
Current share price $121.03

Based on: 10-K (reporting date: 2023-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.81%
Expected rate of return on market portfolio2 E(RM) 13.54%
Systematic risk of Exxon Mobil Corp. common stock βXOM 0.97
 
Required rate of return on Exxon Mobil Corp. common stock3 rXOM 13.28%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rXOM = RF + βXOM [E(RM) – RF]
= 4.81% + 0.97 [13.54% – 4.81%]
= 13.28%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Exxon Mobil Corp., PRAT model

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Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Dividends, common shares 14,941 14,939 14,924 14,865 14,652
Net income (loss) attributable to ExxonMobil 36,010 55,740 23,040 (22,440) 14,340
Sales and other operating revenue 334,697 398,675 276,692 178,574 255,583
Total assets 376,317 369,067 338,923 332,750 362,597
Total ExxonMobil share of equity 204,802 195,049 168,577 157,150 191,650
Financial Ratios
Retention rate1 0.59 0.73 0.35 — -0.02
Profit margin2 10.76% 13.98% 8.33% -12.57% 5.61%
Asset turnover3 0.89 1.08 0.82 0.54 0.70
Financial leverage4 1.84 1.89 2.01 2.12 1.89
Averages
Retention rate 0.41
Profit margin 5.22%
Asset turnover 0.81
Financial leverage 1.95
 
FCFE growth rate (g)5 3.38%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 Retention rate = (Net income (loss) attributable to ExxonMobil – Dividends, common shares) ÷ Net income (loss) attributable to ExxonMobil
= (36,010 – 14,941) ÷ 36,010
= 0.59

2 Profit margin = 100 × Net income (loss) attributable to ExxonMobil ÷ Sales and other operating revenue
= 100 × 36,010 ÷ 334,697
= 10.76%

3 Asset turnover = Sales and other operating revenue ÷ Total assets
= 334,697 ÷ 376,317
= 0.89

4 Financial leverage = Total assets ÷ Total ExxonMobil share of equity
= 376,317 ÷ 204,802
= 1.84

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.41 × 5.22% × 0.81 × 1.95
= 3.38%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (480,228 × 13.28% – 33,211) ÷ (480,228 + 33,211)
= 5.95%

where:
Equity market value0 = current market value of Exxon Mobil Corp. common stock (US$ in millions)
FCFE0 = the last year Exxon Mobil Corp. free cash flow to equity (US$ in millions)
r = required rate of return on Exxon Mobil Corp. common stock

FCFE growth rate (g) forecast

Exxon Mobil Corp., H-model

Microsoft Excel
Year Value gt
1 g1 3.38%
2 g2 4.02%
3 g3 4.67%
4 g4 5.31%
5 and thereafter g5 5.95%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 3.38% + (5.95% – 3.38%) × (2 – 1) ÷ (5 – 1)
= 4.02%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 3.38% + (5.95% – 3.38%) × (3 – 1) ÷ (5 – 1)
= 4.67%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 3.38% + (5.95% – 3.38%) × (4 – 1) ÷ (5 – 1)
= 5.31%