ExxonMobil (XOM)

Total return at 5 years: -2.9%/year = -5.9% appreciation + 3.1% dividend. The target price ($127) is ex-dividend; the $23 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $145 · Multiples $122) is below the market price ($172).

Today — expensive, no margin of safety: at $172 trades ~40.9% above its value discounted to today (~$122); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$79.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($172) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The price discounts growth (7.7%/year) above our base case (4.0%/year) → it is priced for a demanding scenario and leaves little cushion against a slowdown.

That growth implies ~$34.8 bn of owner earnings in year 5 (vs ~$29.2 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on Utilidad neta mid-cycle (P/E). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Rolling grid: the base-year level is the real TTM (revenue $368.8bn to Jun-2026), but earnings are normalized to mid-cycle (not the spot TTM). That TTM was built by chaining two registrants, because in 2026 ExxonMobil reorganized into a holding company and its symbol came to hang from a new CIK: the history stayed under the previous registrant (CIK 34088) and later periods hang from the new one (CIK 2115436), which starts with no history. It is composed from levels —the full 2025 fiscal year from the old one, plus the first half of 2026, less the first half of 2025, both from the new one— and both sources are declared. Base-year capex is kept at the authored level because the new registrant does not yet tag the half-year investing flow: a declared gap is preferred over an invented figure. The gap between the real TTM and the normalization is large and has a name of its own: trailing-twelve-month earnings are $32.8bn against $28.5bn mid-cycle, because the second quarter of 2026 picked up a price jump from supply interruptions in the Middle East (quarterly earnings went from $4.2bn to $14.5bn). That peak is not extrapolated —it is exactly what §2 prohibits in a cyclical— and that is why the path starts with revenue falling from the base year toward the mid-cycle level rather than growing. For the same reason, the flow used to calibrate the capital-allocation cascade is left at the mid-cycle level and not at the trailing-twelve-month level: anchoring it to the peak would make a distribution that is not sustainable look as if it were. ExxonMobil is valued on P/E over mid-cycle net income (normalized crude at ~$62 —the midpoint of the $60-65 range—, well below spot; it is a price-taking cyclical), not on EV/EBITDA. The metric is real normalized net income —~$28.5bn mid-cycle today, growing ~+5%/year on Guyana/Permian volume at a flat mid-cycle price to ~$36bn by year 5, with an even path of ~+5% each year (revenue accelerates slightly in years 4-5 as the Guyana FPSOs come on stream)— and buybacks (~−2%/year) are modeled explicitly in the share path: the share count declines from 4,140 to ~3,742 million and value per share is divided by the future, already lower, share count. It is a conservative net reduction (below the revealed pace of ~−4.6%/year) because at mid-cycle XOM over-distributes (dividends + buybacks > FCF) and buybacks would be cut before the dividend. The exit multiple is kept at 13× —the top of the historical oil-major range (10-13×)— and is not raised above the range: that is the method's anti-concatenated-optimism discipline (§2). Cash does not accumulate: XOM over-distributes, so forward multiples compress because the metric grows (toward ~14× by year 5). Capex is ~90% maintenance (E&P reinvests heavily to replace reserves). Asymmetric profile to the downside: the sign of the return depends on multiple compression, not on volume growth.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $127 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $172, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $127 in 5 years plus $23 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $122. Against the current market price ($172), the margin of safety is -40.9% (trades above the maximum → a premium is paid) and the total return at that price would be -2.9% annually.

• Multiple vs mid-cycle. P/E 25× on mid-cycle earnings ($62 crude) — expensive for an oil major (10-13× history). Re-rated on Guyana plus elevated crude.
• P/NAV (cross-check). The standardized measure of proved reserves is $149bn (floor); market value incorporates downstream + unproved growth.
• Margin of safety. Base -6%/year from price (the multiple reverts) and -3% total return with dividend, below the required return floor → negative margin (no margin). Asymmetric to the downside.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✕ ROIC exceeds the cost of capital (~10%)
• ✓ High incremental ROIC (compounding)
• ✓ CFROIC backs up the ROIC (93%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• ROCE vs cost of capital. ROCE ~10% (mid-cycle), thin for the reinvestment level of a capital-intensive cyclical → modest value creation. The value is in the low-cost assets (Guyana).
• Cash quality. FCF ($24bn mid-cycle) < net income ($28.5bn): reinvests heavily to replace reserves — correctly charges the capex.
• Balance sheet. Strength: net debt 11% of net capital (FY2025 close), high rating — invests through the cycle.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

An oil major's driver is volume × commodity price. XOM grows volume (record production 4.74M boe/d, +27% in 2 years via Guyana + Permian) but the price falls with the cycle (realized crude $78→$65). Volume growth (Guyana moving from 4 to a planned 8 FPSOs by 2030) offsets the flat mid-cycle price. Guyana is the crown jewel: ultra-low-cost crude (break-even well below mid-cycle).

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Real, not nominal. Volume growth (production +27% over 2 years via Guyana) is real; revenue/earnings track the cyclical crude price.
• Growth driver. Guyana (low cost, from 4 to 8 FPSOs by 2030) + Permian — the industry's best volume pipeline. But at flat mid-cycle price.
• Cyclicality. Earnings are cyclical (crude). Spot is running well above mid-cycle ($60-65) — a reversion is likely.

• Relevant in 10 years (recurrence). Oil will keep being used for decades (XOM itself projects demand above 100 million barrels per day through 2050), but the transition is a long-term risk. High recurrence over the medium term.
• Pricing power. None — it's a commodity price-taker. The advantage is low cost, not price.
• Moat and its direction. Narrow moat (commodity) and stable: Guyana adds low-cost volume (from 4 to 8 floating units by 2030) and structural savings accumulate, but that measures size and not a unit gap that opens. Scale + integration.
• Cyclicality. Intrinsically cyclical (tracks the crude price). Earnings went from $55.7bn (2022) to ~$28.5bn (mid-cycle) — pure commodity cycle.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net debt / EBITDA 0.6x
• ✓Interest coverage (EBIT / interest)51.6x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 93% of ROIC
• !Value creation (ROIC − 10% bar)+0pp
• !Malinvestment test (capex vs incremental ROIC)Strong investment mode 1.1x
• !Float / working capitalConsumes cash $2 bn (positive WC)
• ✓Dilution (SBC % of revenue + shares)SBC 0.1% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. Net debt $32.8bn (11% of net capital, FY2025 close) — fortress balance sheet, high rating.
• Sustainability of the return. The dividend is covered by FCF; the $20bn buyback isn't at mid-cycle (over-distributes; net debt-to-capital rising from 4.5% in 2023) → lever to cut.
• Reserves / abandonment. Reserve life ~11 years; abandonment liability $12.5bn (up from $12.0bn in 2024). Reserve replacement is an ongoing expense.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Skin in the game. Insider ownership low as a percentage (no founder control); Woods holds 111× his salary in shares, retains for 10 years post-retirement. High alignment in absolute terms.
• Capital allocation. Strong discipline (compensation tied to ROCE, not production). But over-distributes at mid-cycle (dividends + buybacks above net-of-capex flow).
• Efficiency / integrity. $15.1bn of structural savings since 2019 ($3.0bn in 2025 alone), on the way to $20bn in 2030; transparent disclosure. Compensation 100% performance-based.

• Not cheap — expensive at mid-cycle: 25× on normalized earnings ($62 crude), well above the oil-major history (10-13×).
• The market pays a premium for Guyana (the best growth asset in oil) plus today's elevated crude; the resulting dividend yield (2.4%) is among the lowest of the large integrated majors.
• Consensus is betting that crude stays elevated; the method values on mid-cycle, where the multiple reverts and the price falls.

This is not a bubble like a cyclical re-rated on pure speculative enthusiasm —it is a real, top-quality business— but the multiple reverts toward its historical range and the price falls more than volume grows. What the market is paying for is the combination of Guyana and crude above mid-cycle; the method values normalized through-cycle earnings, and on that reading the dividend cushions the reversion without fully offsetting it.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -13%/year (-51% total): the margin of safety protects the downside. The bull (+3%/year, +14% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Oil price (reversion). Spot is running well above mid-cycle; with OPEC+ oversupply, a reversion to $60-65 (or lower) hits earnings + the multiple. The central disconfirmer.
• Over-distribution. Returns more than its net-of-capex flow at mid-cycle (dividends $17.2bn + buybacks $20.0bn in 2025) → the buyback gets cut if crude falls; net debt-to-capital rises to 11.0% in 2025 from 4.5% in 2023.
• Energy transition. Peak oil demand + carbon regulation, plus active climate litigation from US state and local governments (management calls them "without merit") — structural long-term risk to the multiple.
• Thin value creation. ROCE ~10% at mid-cycle, hovering at the 10% bar: justified only by low-cost growth (Guyana), not by baseline profitability.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: ROIC barely matches the 10% bar (the market's opportunity cost), no excess return.

• Peter Lynch Growth at a reasonable price (GARP)

  A cyclical growing 4% at a PEG of 6.3 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 5% (EBIT/EV) + ROIC 10% → brushes the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 8% vs our 4%: priced for perfection, no favorable mispricing.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -17%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, stable; sources: cost advantage, efficient scale, intangibles → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  The price implies 8% vs our 4%: coherent, but at the optimistic end of the range.