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Is Exxon Mobil Corporation (XOM) the Most Profitable "Cheap" Stock to Buy Now?

Rhys NorthwoodSunday, May 4, 2025 12:29 pm ET
104min read

Exxon Mobil (XOM) has long been a stalwart of the energy sector, but is it now an undervalued gem? With oil prices volatile and global energy dynamics shifting, investors are scrutinizing Exxon’s valuation metrics, profitability, and strategic moves. Let’s dissect the data to determine if this oil giant is a compelling buy at current levels.

Ask Aime: Is Exxon Mobil a good buy with market volatility?

Valuation: A Discounted Leader?

Exxon’s current valuation metrics suggest it’s trading at a discount relative to its historical norms and industry peers. As of May 2025:
- EV/EBITDA: 6.62, below its 10-year median of 7.88 and slightly above the Oil & Gas sector median of 6.34.
- P/E Ratio: 13.55, lower than the sector average, signaling potential undervaluation.
- P/B Ratio: 1.77, near its 3-year low and below its 10-year median of 1.90.

Ask Aime: "Is Exxon Mobil an undervalued gem in the volatile oil market?"

These metrics position Exxon as a relative bargain. However, its EV/EBITDA ranking—worse than 52% of peers—suggests room for growth. Compare this to TotalEnergies (TTE.F), which has a higher P/E but stronger ROE (3.38% vs. Exxon’s 2.86%).

Ask Aime: Is Exxon a bargain after recent price volatility?

CVX, SHEL, XOM Closing Price

Profitability: Steady Cash Flows Amid Headwinds

Despite a 6% drop in Q1 2025 net income to $7.7 billion (vs. $8.2 billion in 2024), Exxon beat Wall Street expectations of $1.73 EPS. Key drivers include:
- Cost Discipline: Cumulative structural savings of $12.7 billion since 2019, with a $18 billion target by 2030.
- Cash Generation: $13 billion in operating cash flow (TTM) and $8.8 billion in free cash flow in Q1 2025.
- Shareholder Returns: $9.1 billion distributed in Q1, including $4.8 billion in buybacks under its $20 billion annual program.

While ROE (2.86%) lags TotalEnergies, Exxon’s net-debt-to-capital ratio of 7% is among the lowest in its peer group, reflecting financial flexibility.

Strategic Momentum vs. Risks

Exxon is doubling down on high-margin projects:
- Permian Basin & Guyana: Volume growth offset falling oil prices, with the Yellowtail FPSO set to add $3 billion in annual earnings by 2026.
- Chemical Complexes: The China polyethylene plant and Baytown advanced recycling unit aim to boost high-value product output.
- Carbon Capture: A new 2 million-ton CCS contract with Calpine brings total capacity to 8.7 million tons, with a 2030 target of 30 million.

EXFY, EXC, EXPE, XOM, EXPD90% Cost Ceiling

Risks Remain:
- Oil Price Volatility: Crude prices fell 18% YTD in early 2025 due to U.S. tariffs and OPEC+ supply hikes.
- Chemical Margins: Asian overcapacity continues to weigh on profits.
- Legal Challenges: The EU’s “unjustified profits tax” and delays in the Baytown Blue Hydrogen project could strain cash flows.

Market Outlook and Analysts’ Take

  • Stock Performance: Exxon’s shares fell 1.38% over the prior 52 weeks to $119.04, underperforming Chevron (+47% upside target) but aligning with a $128.40 consensus price target (+7.8%).
  • Analyst Consensus: “Outperform” ratings dominate, citing Exxon’s low valuation and strong balance sheet.

Conclusion: A Buy for Patient Investors

Exxon Mobil is a compelling buy for investors willing to navigate energy sector volatility. Its low EV/EBITDA (6.62), robust cash flow ($13B TTM), and disciplined capital allocation make it a relative bargain. Strategic projects like the Guyana FPSO and China chemical complex position it to capitalize on long-term demand for oil and petrochemicals.

However, risks—such as oil price swings and regulatory hurdles—require caution. The stock’s 17% three-year TSR leadership also underscores its resilience.

CVX, SHEL, XOM ROE(Average)

Final Verdict: Exxon’s valuation and operational strengths suggest it’s undervalued relative to its peers. For investors with a 3–5 year horizon, XOM offers a high-margin, cash-rich entry into the energy sector. Just be prepared for near-term volatility tied to oil prices and macroeconomic shifts.

In a sector where “cheap” often comes with risks, Exxon’s fundamentals make it a standout candidate—provided you’re ready to ride the energy rollercoaster.

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MasterDeath
05/04
Permian Basin & Guyana projects are bright spots. High-margin growth is what we want in this price environment.
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twiggs462
05/04
@MasterDeath Permian & Guyana are solid plays, but watch out for oil price swings.
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superbilliam
05/04
I'm all for carbon capture, but Calpine's contract feels like a drop in the bucket. More to come on this front?
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Downtown_Bug3176
05/04
@superbilliam Yeah, Calpine's deal is a start, but Exxon's got more irons in the fire with CCS.
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Jera_Value
05/04
XOM's cash flow is solid, but oil's a gamble.
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ContentSort1597
05/04
I'm holding XOM long-term; volatility's just part of game.
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k_ristovski
05/04
Exxon's cheap compared to peers, but volatility is wild. Long-term play only for the patient traders out there.
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dragonilly
05/04
@k_ristovski Totally agree, volatility's crazy.
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BeefMasters1
05/04
@k_ristovski How long u holding XOM?
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Zurkarak
05/04
XOM's cash flow is solid, but those regulatory hurdles could hit hard. 🤔
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DotCatLost
05/04
@Zurkarak True, regs can hit.
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tielgee
05/04
Low P/B ratio is tempting, but oil price swings are a rollercoaster. Diversifying my portfolio to handle the risk.
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ReindeerApart5536
05/04
Exxon's undervalued, but those metrics could change fast.
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daynightcase
05/04
$119 stock price feels sticky. Analysts say "Outperform," but I need more conviction in this shaky market.
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Warren_Buffetts_Alt
05/04
@daynightcase True, XOM's price feels sticky. Analysts are bullish, but the market's shaky. You might want to wait for a dip or more convincing signals before diving in.
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uncensored_84
05/04
EV/EBITDA looks juicy, but chemical margins could bite. Watching Asian market moves for hints on petrochemicals.
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acg7
05/04
@uncensored_84 What’s your take on oil price volatility?
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Really_Schruted_It
05/04
Risky play in energy, but potential's huge with XOM.
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serkankster
05/04
XOM's strategic moves are strong, but CCS projects feel like long-term bets. Not sure if they'll pay off yet.
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BeefMasters1
05/04
7% net-debt-to-capital ratio is lean, but ROE lags. TotalEnergies seems like a beTTEr play if you ask me.
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BloodForThCursedIdol
05/04
XOM's valuation is a discount, but not a get-rich-quick ticket. 3–5 years hold, anyone? 🤓
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madmarkk90
05/04
Wow!I successfully capitalized on the XOM stock's bearish trend, generating $436!
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Defiant-Tomatillo851
05/04
@madmarkk90 Nice score! How long were you holding XOM, and what's your next move?
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