Marathon Oil Corporation (MRO) Stock Valuation — DCF Analysis
Oil & Gas Exploration & Production · NYSE
Current Price
$28.55
Intrinsic Value
$29.41
+2.9% margin of safety
COMPETITIVE MOAT
↑Low-Cost Production Assets
MRO possesses a portfolio of high-quality, low-cost oil and gas assets, particularly in the Eagle Ford and Permian Basins. This allows for profitable production even during periods of lower commodity prices.
↑Operational Efficiency Focus
The company demonstrates a strong commitment to operational efficiency and cost discipline. This focus helps to maximize margins and cash flow generation from its existing production base.
↑Disciplined Capital Allocation
MRO prioritizes returning capital to shareholders through dividends and share buybacks, alongside prudent reinvestment in its core assets. This shareholder-friendly approach fosters investor confidence.
INVESTMENT RISKS
↓Commodity Price Volatility
As an oil and gas producer, MRO's financial performance is highly sensitive to fluctuations in crude oil and natural gas prices. Significant price drops can negatively impact revenue and profitability.
↓Regulatory and Environmental Scrutiny
The energy industry faces increasing regulatory and environmental pressures. Changes in climate policy or stricter environmental regulations could lead to increased compliance costs and operational challenges.
↓Geopolitical Instability
Global geopolitical events can disrupt supply chains and impact energy demand, leading to price volatility and potential operational disruptions for MRO.
Base case
MRO base case valuation
A base case discounted cash flow model for MRO estimates an intrinsic value of about $29.41 per share, against a current price of $28.55. The model assumes -2.2% annual free cash flow growth, a 10.0% discount rate, and a 8x exit multiple.
Intrinsic Value
$29.41
Margin of safety
+2.9%
Expected annual return
+0.6%
Base case assumptions: -2.2% 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%. This relatively low P/FCF may suggest the stock is attractively priced relative to its cash generation. 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.