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Should Value Investors Pick Marathon Petroleum (MPC) Stock?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Marathon Petroleum Corporation (MPC - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Marathon Petroleum has a trailing twelve months PE ratio of 19.1, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 21.1. If we focus on the stock’s long-term PE trend, the current level puts Marathon Petroleum’s current PE ratio noticeably above its midpoint (which is 10.8) over the past five years.
Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 23.4. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Marathon Petroleum has a forward PE ratio (price relative to this year’s earnings) of just 17.1, so it is fair to say that a slightly more value-oriented path may be ahead for Marathon Petroleum’s stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Marathon Petroleum has a P/S ratio of about 0.5. This is substantially lower than the S&P 500 average, which comes in at 3.4 right now. Also, as we can see in the chart below, this is equivalent to the highs for this stock in particular over the past few years.
MPC is actually in the higher zone of its trading range in the time period per the P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Marathon Petroleum currently has a Value Style Score of A, putting it into the top 20% of all stocks we cover from this look. This makes MPC a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Marathon Petroleum is just 1.6, a level that is marginally lower than the industry average of 2.0. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 10.4, which is slightly better than the industry average of 10.9. Clearly, MPC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Marathon Petroleum might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of A and a Momentum score of A. This gives MPC a VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter has seen five estimates go higher in the past sixty days, compared to none lower, while the full year estimate has seen six upward and no downward revisions in the same time period.
This has had a favorable impact on the consensus estimate, as the current quarter consensus estimate has surged about 42.5% in the past two months, while the full year estimate has climbed nearly 23%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Marathon Petroleum Corporation Price and Consensus
The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Marathon Petroleum is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.
Bottom Line
Marathon Petroleum is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a decent industry rank (top 43% out of more than 250 industries) further supports the growth potential of the stock. However, with a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past one year, the sector has clearly underperformed the broader market, as you can see below:
Despite positive estimate revision activity, investors should wait for industry trends to turn around first. When it does, this stock could be a compelling value pick.
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While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
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Should Value Investors Pick Marathon Petroleum (MPC) Stock?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Marathon Petroleum Corporation (MPC - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Marathon Petroleum has a trailing twelve months PE ratio of 19.1, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 21.1. If we focus on the stock’s long-term PE trend, the current level puts Marathon Petroleum’s current PE ratio noticeably above its midpoint (which is 10.8) over the past five years.
Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 23.4. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Marathon Petroleum has a forward PE ratio (price relative to this year’s earnings) of just 17.1, so it is fair to say that a slightly more value-oriented path may be ahead for Marathon Petroleum’s stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Marathon Petroleum has a P/S ratio of about 0.5. This is substantially lower than the S&P 500 average, which comes in at 3.4 right now. Also, as we can see in the chart below, this is equivalent to the highs for this stock in particular over the past few years.
MPC is actually in the higher zone of its trading range in the time period per the P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Marathon Petroleum currently has a Value Style Score of A, putting it into the top 20% of all stocks we cover from this look. This makes MPC a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Marathon Petroleum is just 1.6, a level that is marginally lower than the industry average of 2.0. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 10.4, which is slightly better than the industry average of 10.9. Clearly, MPC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Marathon Petroleum might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of A and a Momentum score of A. This gives MPC a VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter has seen five estimates go higher in the past sixty days, compared to none lower, while the full year estimate has seen six upward and no downward revisions in the same time period.
This has had a favorable impact on the consensus estimate, as the current quarter consensus estimate has surged about 42.5% in the past two months, while the full year estimate has climbed nearly 23%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Marathon Petroleum Corporation Price and Consensus
Marathon Petroleum Corporation Price and Consensus | Marathon Petroleum Corporation Quote
The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Marathon Petroleum is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.
Bottom Line
Marathon Petroleum is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a decent industry rank (top 43% out of more than 250 industries) further supports the growth potential of the stock. However, with a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past one year, the sector has clearly underperformed the broader market, as you can see below:
Despite positive estimate revision activity, investors should wait for industry trends to turn around first. When it does, this stock could be a compelling value pick.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
Click here for Zacks' private trades >>