I updated Exxon Mobil’s (XOM) data last night. Here’s a view of last quarter’s one-year chart vs. this quarter’s one-year chart.
Last Quarter
Back in February Exxon was all-hyped up. The stock was getting a lot of airtime on CNBC and small investors were talking it up.
The stock had just from from below $60 to $83 and it seemed as though the run was no-doubt going to continue. Oil prices pushed past $100, the economy was strong and unrest in the Middle East was expected to disrupt oil production.
Do note the stock’s P/E is 12. That’s about right for Exxon. 12 times earnings is a fair price to pay for XOM. The company pays a nice dividend (currently 2 1/4%) and has a solid history of growing profits, much better than the other big oil companies in my opinion.
This Quarter
This quarter’s one-year chart shows a stock that’s basing. I like that XOM is at the bottom of the range, if the stock breaks out to a new high this will prove to be an excellent buy point. But oil prices are falling, so the stock might not break out. The concern with that is the stock was $60 les than a year ago, and its possible lower oil could cause profit estimates to fall, and if that happens then $60 could occur.
Two big differences in these charts. First, the P/E has dropped from 12 to 9. This stock is now a very good bargain. Even for me, a growqth stock guy who is attracted to the faster growers.
Second, the 2011 profit estimate has jumped from $7.04 to $8.72. That’s a big jump, and the reason the P/E has dropped even though the stock has stayed flat.
Bottom Line
Exxon is on my radar. I feel like buying it for the Growth Portfolio. I think this move from commodities will push money into Blue Chips, the catch is XOM is a Blue Chip that deals with commodities. The upside for XOM is solid, as the Fair Value table shows. The risk is these profit estimates aren’t certain.
