Is Marathon Petroleum (MPC) Pricing Reflect Its Strong Multi Year Share Price Performance

• If you are wondering whether Marathon Petroleum’s current share price reflects its underlying value, you are not alone. This article walks through what the numbers are actually saying.
• The stock last closed at US$181.09, with returns of 5.0% over 7 days, a 2.4% decline over 30 days, 9.7% year to date, 21.8% over 1 year, 59.4% over 3 years and a very large gain over 5 years.
• Recent attention on Marathon Petroleum has focused on how the stock has behaved over different timeframes, including shorter term moves that contrast with its longer term track record. This mix of shorter term volatility and longer term performance has kept valuation front of mind for many investors following the company.
• On Simply Wall St’s checklist, Marathon Petroleum records a valuation score of 4 out of 6. This sets up a closer look at how different valuation methods line up on the stock and hints at a deeper way to think about value that we will return to at the end of this article.

Marathon Petroleum delivered 21.8% returns over the last year. See how this stacks up to the rest of the Oil and Gas industry.

Approach 1: Marathon Petroleum Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model takes estimates of the cash a company could generate in the future, then discounts those amounts back into today’s dollars to arrive at an estimate of what the business might be worth now.

For Marathon Petroleum, the latest twelve month free cash flow is about $5.07b. Analysts and Simply Wall St projections suggest free cash flow of $5.40b in 2026 and $5.82b in 2027, with further yearly projections out to 2035 extrapolated from these inputs. These longer term estimates range up to about $7.99b of free cash flow, with each year’s figure discounted back to today using a 2 Stage Free Cash Flow to Equity model.

Adding these discounted cash flows together gives an estimated intrinsic value of about $489.66 per share. Compared with the recent share price of $181.09, the model implies the stock trades at a 63.0% discount to this DCF estimate. On this set of assumptions, the shares appear to be undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Marathon Petroleum is undervalued by 63.0%. Track this in your watchlist or portfolio, or discover 886 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Marathon Petroleum.

Approach 2: Marathon Petroleum Price vs Earnings

For a profitable company like Marathon Petroleum, the P/E ratio is a useful way to relate what you are paying per share to the earnings the business is currently generating. It gives you a quick sense of how many dollars investors are willing to pay today for each dollar of recent earnings.

What counts as a “normal” or “fair” P/E ratio usually reflects how the market views a company’s growth prospects and risks. Higher expected growth and lower perceived risk can support a higher P/E, while slower growth or higher uncertainty can justify a lower P/E.

Marathon Petroleum currently trades on a P/E of 18.91x. That is above the Oil and Gas industry average P/E of 13.70x, but below the peer group average of 31.74x. Simply Wall St’s Fair Ratio for Marathon Petroleum is 21.05x, which is a proprietary estimate of the P/E that might be expected given factors such as its earnings growth profile, profit margins, industry, market cap and risk characteristics.

This Fair Ratio can be more informative than a simple comparison with peers or the broad industry because it adjusts for company specific traits rather than assuming all firms deserve similar multiples. With the current P/E of 18.91x below the Fair Ratio of 21.05x, the shares screen as undervalued on this metric.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1438 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Marathon Petroleum Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. Here you describe your story for Marathon Petroleum, link it to a simple forecast for revenue, earnings and margins, and arrive at your own Fair Value that you can easily compare with today’s share price inside the Simply Wall St Community page. Different Narratives range from more optimistic views that lean closer to the higher analyst price targets around US$214 to more cautious views that sit near the lower targets around US$142. All of these update automatically as new earnings, news and valuation inputs are refreshed on the platform, such as the current Fair Value of about US$200.11, the expected revenue trend of roughly 1.27% decline, a profit margin assumption of about 3.62% and a future P/E of roughly 14.18x.

Do you think there’s more to the story for Marathon Petroleum? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com