Stock Analysis on Net

Exxon Mobil Corp. (NYSE:XOM)

Dividend Discount Model (DDM)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.


Intrinsic Stock Value (Valuation Summary)

Exxon Mobil Corp., dividends per share (DPS) forecast

US$

Microsoft Excel
Year Value DPSt or Terminal value (TVt) Calculation Present value at 13.52%
0 DPS01 3.68
1 DPS1 3.80 = 3.68 × (1 + 3.38%) 3.35
2 DPS2 4.00 = 3.80 × (1 + 5.06%) 3.10
3 DPS3 4.27 = 4.00 × (1 + 6.74%) 2.92
4 DPS4 4.63 = 4.27 × (1 + 8.42%) 2.79
5 DPS5 5.09 = 4.63 × (1 + 10.10%) 2.70
5 Terminal value (TV5) 164.18 = 5.09 × (1 + 10.10%) ÷ (13.52%10.10%) 87.09
Intrinsic value of Exxon Mobil Corp. common stock (per share) $101.95
Current share price $118.63

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

1 DPS0 = Sum of the last year dividends per share of Exxon Mobil Corp. common stock. 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)

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 4.65%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk of Exxon Mobil Corp. common stock βXOM 0.97
 
Required rate of return on Exxon Mobil Corp. common stock3 rXOM 13.52%

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]
= 4.65% + 0.97 [13.79%4.65%]
= 13.52%


Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

Exxon Mobil Corp., PRAT model

Microsoft Excel
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
 
Dividend 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
= (36,01014,941) ÷ 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%


Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × ($118.63 × 13.52%$3.68) ÷ ($118.63 + $3.68)
= 10.10%

where:
P0 = current price of share of Exxon Mobil Corp. common stock
D0 = the last year dividends per share of Exxon Mobil Corp. common stock
r = required rate of return on Exxon Mobil Corp. common stock


Dividend growth rate (g) forecast

Exxon Mobil Corp., H-model

Microsoft Excel
Year Value gt
1 g1 3.38%
2 g2 5.06%
3 g3 6.74%
4 g4 8.42%
5 and thereafter g5 10.10%

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

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 3.38% + (10.10%3.38%) × (2 – 1) ÷ (5 – 1)
= 5.06%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 3.38% + (10.10%3.38%) × (3 – 1) ÷ (5 – 1)
= 6.74%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 3.38% + (10.10%3.38%) × (4 – 1) ÷ (5 – 1)
= 8.42%