Exxon Mobil (XOM)

Much has been made of Berkshire Hathaway’s recent sale of Exxon Mobil ($XOM) in recent days — with Buffett himself stepping up to defend the company as a high-quality industry leader.  From a long term investing perspective, some of the integrated oil companies look compelling but may admittedly have some tough sledding for the next 18-24 months if current EPS forecasts are credible and materialize.

Because yes, Virginia, stock prices do ultimately follow earnings.

Here’s a look at current Equity Analysis Guide worksheet for Exxon Mobil (XOM) showing the turbulence. It’s not small.

That long-term growth trend is approximately 2%.

Xom eagle 20150304

Exxon Mobil (XOM) can also be an example of using a different valuation method (P/CF) for building a return forecast.

In this case, do a regression-based sales forecast for 5 years from now (~460,000).

The cash flow margin (cash flow/sales) is quite consistent at 13%.

The price-to-cash flow (P/CF) is also very consistent at 8.0×.

Xom pcf 20150304

This supports an average long-term price forecast of $115 — and a return forecast of 8-9%.
Xom pcf forecast 20150304

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