Stock Analysis on Net
Stock Analysis on Net

Exxon Mobil Corp. (NYSE:XOM)

Present Value of Free Cash Flow to the Firm (FCFF)

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. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Exxon Mobil Corp., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 12.76%
01 FCFF0 34,613
1 FCFF1 35,914 = 34,613 × (1 + 3.76%) 31,850
2 FCFF2 37,481 = 35,914 × (1 + 4.37%) 29,480
3 FCFF3 39,346 = 37,481 × (1 + 4.97%) 27,445
4 FCFF4 41,542 = 39,346 × (1 + 5.58%) 25,698
5 FCFF5 44,115 = 41,542 × (1 + 6.19%) 24,202
5 Terminal value (TV5) 713,443 = 44,115 × (1 + 6.19%) ÷ (12.76% – 6.19%) 391,405
Intrinsic value of Exxon Mobil Corp. capital 530,080
Less: Debt (fair value) 38,390
Intrinsic value of Exxon Mobil Corp. common stock 491,690
 
Intrinsic value of Exxon Mobil Corp. common stock (per share) $111.87
Current share price $118.63

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.

Weighted Average Cost of Capital (WACC)

Exxon Mobil Corp., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 521,390 0.93 13.52%
Debt (fair value) 38,390 0.07 2.42% = 3.44% × (1 – 29.60%)

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

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 4,395,094,536 × $118.63
= $521,390,064,805.68

   Debt (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (33.00% + 33.00% + 31.00% + 17.00% + 34.00%) ÷ 5
= 29.60%

WACC = 12.76%

FCFF Growth Rate (g)

FCFF 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)
Interest expense 849 798 947 1,158 830
Net income (loss) attributable to ExxonMobil 36,010 55,740 23,040 (22,440) 14,340
 
Effective income tax rate (EITR)1 33.00% 33.00% 31.00% 17.00% 34.00%
 
Interest expense, after tax2 569 535 653 961 548
Add: Dividends, common shares 14,941 14,939 14,924 14,865 14,652
Interest expense (after tax) and dividends 15,510 15,474 15,577 15,826 15,200
 
EBIT(1 – EITR)3 36,579 56,275 23,693 (21,479) 14,888
 
Notes and loans payable 4,090 634 4,276 20,458 20,578
Long-term debt, excluding due within one year 37,483 40,559 43,428 47,182 26,342
Total ExxonMobil share of equity 204,802 195,049 168,577 157,150 191,650
Total capital 246,375 236,242 216,281 224,790 238,570
Financial Ratios
Retention rate (RR)4 0.58 0.73 0.34 — -0.02
Return on invested capital (ROIC)5 14.85% 23.82% 10.95% -9.56% 6.24%
Averages
RR 0.41
ROIC 9.26%
 
FCFF growth rate (g)6 3.76%

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).

1 See details »

2023 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 849 × (1 – 33.00%)
= 569

3 EBIT(1 – EITR) = Net income (loss) attributable to ExxonMobil + Interest expense, after tax
= 36,010 + 569
= 36,579

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [36,579 – 15,510] ÷ 36,579
= 0.58

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 36,579 ÷ 246,375
= 14.85%

6 g = RR × ROIC
= 0.41 × 9.26%
= 3.76%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (559,780 × 12.76% – 34,613) ÷ (559,780 + 34,613)
= 6.19%

where:

Total capital, fair value0 = current fair value of Exxon Mobil Corp. debt and equity (US$ in millions)
FCFF0 = the last year Exxon Mobil Corp. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Exxon Mobil Corp. capital

FCFF growth rate (g) forecast

Exxon Mobil Corp., H-model

Microsoft Excel
Year Value gt
1 g1 3.76%
2 g2 4.37%
3 g3 4.97%
4 g4 5.58%
5 and thereafter g5 6.19%

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)
= 3.76% + (6.19% – 3.76%) × (2 – 1) ÷ (5 – 1)
= 4.37%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 3.76% + (6.19% – 3.76%) × (3 – 1) ÷ (5 – 1)
= 4.97%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 3.76% + (6.19% – 3.76%) × (4 – 1) ÷ (5 – 1)
= 5.58%