Marathon Oil Corporation (MRO) Intrinsic Value & DCF Valuation
Oil & Gas Exploration & Production · NYSE
Current Price
$28.55
Intrinsic Value
$45.06
+36.6% margin of safety
What Is Marathon Oil Corporation's Intrinsic Value?
As of 2024-11-21, the base-case DCF model estimates the intrinsic value of Marathon Oil Corporation (MRO) at $45.06 per share, compared with a market price of $28.55, a margin of safety of +36.6%. The base case assumes 0.0% annual free cash flow growth and a 10.0% discount rate.
Across the sensitivity grid the estimate spans $39.42 to $51.74. Intrinsic value is an estimate built on assumptions, not a fact. A higher discount rate or slower growth pushes the estimate down, while stronger cash flow growth lifts it.
How the DCF works · Recalculate with your own assumptions · What is intrinsic value?
Is Marathon Oil Corporation (MRO) Undervalued?
At the current price of $28.55, MRO trades well below the base-case intrinsic value estimate, a margin of safety above 30%. By this model the stock looks undervalued, but verify the growth assumptions match your own view before acting.
COMPETITIVE MOAT
↑Low-Cost Production Assets
MRO possesses strategically located, low-cost oil and gas reserves. This provides a structural advantage in production costs, enabling profitability even in lower commodity price environments.
↑Geographic Diversification
Operations are spread across multiple basins, reducing reliance on any single region. This diversification mitigates localized operational risks and regulatory changes.
↑Operational Efficiency
A focus on efficient drilling and completion techniques allows for optimized resource extraction. This translates to higher returns on capital deployed in exploration and production.
INVESTMENT RISKS
↓Transition to Renewable Energy
The global shift towards renewable energy sources could lead to reduced long-term demand for oil and gas. This poses a strategic risk to MRO's core business model.
↓Geopolitical Instability
Conflicts and political instability in oil-producing regions can disrupt supply chains and impact global energy prices. This creates uncertainty for MRO's operations and market access.
↓Capital Intensity and Debt
The oil and gas industry is capital-intensive, requiring significant investment. High debt levels can increase financial risk, especially during periods of low commodity prices.
Base case
MRO base case valuation
Intrinsic Value
$45.06
Margin of safety
+36.6%
Expected annual return
+9.6%
Base case assumptions: 0.0% annual growth, 10.0% discount rate, 8x exit multiple, 5 year projection. Data as of 2024-11-21.
This base case uses default assumptions and is not financial advice. The intrinsic value changes significantly when the growth rate or discount rate changes. Open the calculator to set your own assumptions and see the full sensitivity range.
Customize the MRO valuation
Adjust the growth rate, discount rate, and exit multiple to see how the intrinsic value and margin of safety for Marathon Oil Corporation respond.
Open DCF Calculator for MROCompany Overview
Marathon Oil Corporation operates as an independent upstream energy company, primarily focusing on exploration, development, and production activities within the United States and international markets. The firm is engaged in discovering, extracting, and commercializing crude oil, condensate, natural gas liquids (NGLs), and natural gas. Additionally, it manufactures and sells refined natural gas products such as liquefied natural gas (LNG) and methanol. Its operational assets include 32 central gathering and treatment facilities, along with the Sugarloaf natural gas pipeline, a 42-mile system traversing Karnes and Atascosa Counties. Established in 1887, the company was formerly USX Corporation before rebranding to Marathon Oil Corporation in December 2001. Its corporate headquarters are located in Houston, Texas.
Financial Metrics — MRO Stock Valuation Data
Revenue/Share (TTM)
$10.56
FCF/Share (TTM)
$3.38
ROIC (TTM)
10.3%
ROE (TTM)
13.8%
P/FCF
7.8x
EV/EBITDA
4.7x
FCF Yield
12.86%
Debt/Equity
0.48x
Based on trailing twelve-month data, MRO shows a free cash flow per share of $3.38 and a ROIC of 10.3%, key inputs for stock valuation using the DCF method. The P/FCF ratio of 7.8x and FCF yield of 12.86% are important context metrics when evaluating MRO's stock valuation relative to peers.
Frequently Asked Questions
What is the intrinsic value of MRO?
Marathon Oil Corporation currently generates $3.38 in free cash flow per share. At the current price of $28.55, a DCF model would discount these cash flows at an appropriate WACC and apply a terminal growth rate to arrive at an intrinsic value. The result depends heavily on your growth and discount rate assumptions — a 1% change in WACC typically shifts the fair value estimate by 10-15%. In MiniValuator the model uses a single discount rate that you can edit directly, 10% by default, rather than a computed WACC.
Is MRO undervalued?
MRO trades at a P/FCF ratio of 7.8x with a free cash flow yield of 12.86%. A low P/FCF means investors are paying less per dollar of free cash flow; whether that is cheap depends on the company's growth, cyclicality, and capital intensity. However, whether MRO is truly undervalued requires comparing the DCF intrinsic value to the current market price and evaluating whether the margin of safety is sufficient for your risk tolerance.
How do I value MRO stock using DCF?
To perform a DCF valuation on Marathon Oil Corporation: (1) Start with the trailing free cash flow per share ($3.38) as the base, (2) project future FCF growth over 5-10 years based on Oil & Gas Exploration & Production industry trends and company fundamentals, (3) apply a discount rate (WACC) reflecting MRO's risk profile — with a debt-to-equity of 0.48x, capital structure is an important factor, and (4) add a terminal value for cash flows beyond the projection period.
What is DCF valuation and how does it apply to MRO?
DCF (Discounted Cash Flow) estimates what a company is worth today based on its future cash generation. For Marathon Oil Corporation, this means projecting how much free cash flow the company will produce over the next 5-10 years, shaped by Oil & Gas Exploration & Production trends, then discounting those amounts to today's dollars. MRO's ROIC of 10.3% shows moderate capital returns.
How does WACC affect MRO stock valuation?
WACC (Weighted Average Cost of Capital) is the discount rate in a DCF model — it reflects the minimum return investors require. For MRO, with a debt-to-equity ratio of 0.48x, the capital structure directly influences WACC. A 1% increase in WACC typically reduces the intrinsic value by 10-15%. At an EV/EBITDA of 4.7x, the market's implied discount rate can be reverse-engineered for comparison. In MiniValuator you set this discount rate yourself as a single editable number, 10% by default, instead of computing a formal WACC.
Learn More
- See MRO PE Valuation → — Earnings-based stock valuation using PE ratio analysis
- DCF Methodology — Step-by-step guide to discounted cash flow analysis
- PE Methodology — Guide to PE ratio stock valuation
- WACC — Understanding the discount rate used in DCF
- Margin of Safety — How to evaluate downside protection
- Intrinsic Value — How to evaluate stock fair value
- How to Calculate Intrinsic Value — Complete guide for investors
Related Valuations
All Energy valuationsDCF and P/E value MRO with different methods and assumptions, so the two conclusions can differ. Compare the P/E fair value.
Price as of 2024-11-21. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.