TAKING A CLOSER LOOK online resources to work on this chapter\'s questions. Plea
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TAKING A CLOSER LOOK online resources to work on this chapter's questions. Please note that website information anges over time, and these changes may limit your ability to answer some of these questions Use ETIMATING ExXON MOBIL CORPORATION'S INTRINSIC STOCK VALUE chapter, we described the various factors that influence stock prices and the approaches that use to estimate a stock's intrinsic value. By comparing these intrinsic value estimates to the current an investor can assess whether it makes sense to buy or sell a particular stock. Stocks trading at a pnice far below their estimated intrinsic values may be good candidates for purchase, whereas stocks at prices far in excess of their intrinsic value may be good stocks to avoid or sell. Although In this estimating a stock's intrinsic value is a complex exercise that requires reliable data and good judgment use the Internet to find financial data in order to arrive at a quick "back-of-the-envelope" akulation of intrinsic value Discussion Questions L For purposes of this exercise, let's take a closer look at the stock of Exxon Mobil Corporation (XOM). Use websites performance relative to the overall market in recent months. What is Exxon Mobil's current stock price? How has 2 Check recent headlines on the website to see the company's recent news stories. Have there been any recent To provide a starting point for gauging a company's relative valuation, analysts often look at a company's price- foney to find the company's current stock price and see its the stock performed relative to the market over the past few months? vents impacting the company's stock price, or have things been relatively quiet? o-eamings (P/E) ratio. Go to the website's summary quote or key statistics screen to see XOM's forward P/E tabio, which uses XOM's next 12-month estimate of eamings in the calculation, and to see its current P/E ratio. What are the firm's forward and current P/E ratios? o put XOM's P/E ratio in perspective, it is useful to see how this ratio has varied over time. (If you go to MSN screen shows its current oney, you will find a 10-year summary of key statistics. In addition, the price ratios E ratio, its nerage? XOM's current P/E To put the firm's 5-year hy the current P/E deviates from its historical trend. On the basis of this information, does current P/E ratio in perspective, it is useful to compare this ratio with that of other companies in r high, and its 5-year low.) Is XOM's current P/E ratio well above or well below its latest suggest that the stock is undervalued or overvalued? Explain. ra imber of Leeen (If you click "Add or remove columns," you will find that you can obtain comparisons of a for either the most recent year or quarter.) For the most part, is XOM's P/E ratio above or lo see how XOM's P/E ratio stacks up to its peers, refer to Google Finance's Related number of key statistics e fcors e peers? In Chapter 4, we discussed the various factors that may influence P/E ratios. Can any of things using the discounted dividend model to estimate a stock's intrinsic value. To keep s assume at first that XOM's dividend is expected to grow at a constant rate of 5 text we plain why XOM's P/E ratio differs from its peers? Explain. ba eri yearf so, g-5% If so, the intrinsic value equals D/(n-g), where D is the expected annual the ro ow, r is the stock's required rate of return, and g is the dividend's constant growth rate s possible, let's estimate oferview) screen and find XOM's current dividend. Multiply this dividend by 1 + g toExplanation / Answer
1)In last one year exxon mobil price has come down from $92 to $81(13% down) while S&P 500 index has gone up from 2238 to 2600(16% up).It has underperformed the market by huge gap.(Too see this you need to msn money-type exxon in quote-then click on compare on the above right side of the graph.)
2)In last three month price has an uptick when it went from an one year low of $76 to $83 as exxon mobil is starting production in Canadas hebron plant. Which will increase revenue. But then there are news of subdued oil price which has caused the price decline from 92.
3)While current PE ratio ranges from 26 to 29. Forward PE is ranging from 20 to 23 on different websites.This means that analyst are expecting earning and then profit of Exxon mobile to increase in next year which will increase EPS thus resulting in low forward PE.(On MSN money Forward PE -22.68 and current PE is 26
4)Five year high PE – 34
Five year Low PE -21.68
Current PE -26.60 As per this data we cant say much. As this PE comes in middle.Only thing can be said that Exxon is not overvalued. But if it undervalued then we need to know other things such such future earnings projection etc.
5)- Exxon PE is maily below its Peers such as Chevron and BP but many of it fundamental are better than these companies(Low beta,high NPM and good solvency ratio)This means that Exxon is under priced.
Exxon Mobil Corpo -26.64
Chevron Corporation -33.93
Royal Dutch Shell -24.66
BP plc (ADR)-39.90
6)D0 – 3.08
D1 = 3.08*1.05 = 3.234
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