Is Marathon Petroleum (MPC) Still Attractive After A 69% One Year Share Price Surge
Track your investments for FREE with Simply Wall St, the portfolio command center trusted by over 7 million individual investors worldwide.
If you are wondering whether Marathon Petroleum’s recent share price puts it on sale or stretches its value, the next sections will walk through what the current numbers actually say.
At a last close of US$266.17, the stock shows returns of 2.9% over 7 days, 8.7% over 30 days, 61.2% year to date and 69.3% over 1 year, with a very large gain over 5 years.
Recent news coverage has focused on Marathon Petroleum as a major US refiner and fuels supplier, with attention on how market conditions and company actions interact with the share price. Commentary around the business helps frame whether investors see current levels as pricing in expectations or leaving a margin of safety.
The company currently has a valuation score of 3/6, based on how many checks suggest the stock is undervalued. The following sections will compare different valuation approaches before closing with an integrated way to think about what that score really means.
Approach 1: Marathon Petroleum Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model estimates what a stock could be worth by projecting future cash flows and then discounting them back to today using a required return. It is essentially asking what all those future dollars are worth in present terms.
For Marathon Petroleum, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flow projections. The latest twelve month Free Cash Flow is about $6.7b. Analyst and extrapolated estimates suggest annual Free Cash Flow values between roughly $4.4b and $10.7b over the next decade, with Simply Wall St extending projections beyond the period covered by analysts.
Using these projections, the DCF model arrives at an estimated intrinsic value of about $388.76 per share. Compared with the recent share price of $266.17, this implies the stock is trading at about a 31.5% discount to that intrinsic value. On this measure alone, the stock screens as undervalued.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Marathon Petroleum is undervalued by 31.5%. Track this in your watchlist or portfolio, or discover 47 more high quality undervalued stocks.
Approach 2: Marathon Petroleum Price vs Earnings
For a profitable company, the P/E ratio is a useful shorthand for what investors are currently willing to pay for each dollar of earnings. It links directly to your basic trade off: how much you pay today versus the earnings the company is already generating.
What counts as a “normal” P/E depends on how fast earnings are expected to grow and how risky those earnings appear. Higher expected growth and lower perceived risk usually support a higher multiple, while slower growth or higher uncertainty tend to point to a lower one.
Marathon Petroleum currently trades on a P/E of 16.79x, compared with an Oil and Gas industry average of about 13.77x and a peer average of 15.86x. Simply Wall St’s Fair Ratio for the stock is 20.05x, a proprietary estimate of what the P/E might be given factors such as earnings growth, profit margin, industry, market cap and specific risks. Because it blends these company level drivers, the Fair Ratio can offer a more tailored anchor than a simple comparison with peers or the broad industry.
With the current P/E of 16.79x sitting below the Fair Ratio of 20.05x, the multiple suggests the stock may be trading at a discount on this measure.
Result: UNDERVALUED
Wall Street’s queuing for one rocket. While SpaceX counts down to its IPO, other companies tied to the new space race are already in orbit. → 20 Compelling Space Companies watchlist · Global Space Race Investing Ideas screener · Scan the sector by valuation on Rocket Lab’s valuation page.
Upgrade Your Decision Making: Choose your Marathon Petroleum Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so this is where Narratives come in as a simple way for you to connect your view of a company with the numbers behind it.
A Narrative is your story for Marathon Petroleum, where you spell out what you think happens to revenue, earnings and margins, and then link that story to a fair value estimate rather than only relying on a single model output.
On Simply Wall St, Narratives sit inside the Community page and turn this story into a full forecast and fair value. They are then lined up against the current share price so you can see if your view suggests the stock is expensive or offers a margin of safety.
Because Narratives update as new data, news or earnings are added, your Marathon Petroleum view can move in line with fresh information instead of staying frozen at the moment you first ran the numbers.
For example, one investor might align with the bullish Fair Value of about US$318.81 based on higher growth and margin assumptions. Another might lean toward the more cautious Fair Value of about US$163.00. By comparing each Narrative’s fair value to today’s price, each investor can decide whether current levels look attractive or stretched relative to their own story.
For Marathon Petroleum, here are previews of two leading Marathon Petroleum narratives:
🐂 Marathon Petroleum Bull Case
Fair value in this bullish narrative: US$318.81 per share
Implied discount to this fair value versus the last close of US$266.17: about 16.5%
Revenue growth assumption in this view: about 4.16% a year
Expects refinery and midstream projects across Galveston Bay, Garyville, Robinson, El Paso and MPLX to support utilization, margins and cash flow, with a larger share of investment flowing into natural gas and NGL infrastructure.
Builds in revenue growing 4.2% a year and profit margins rising from 3.0% to 5.7% by 2029, with earnings of US$8.6b and a lower future P/E of 11.9x compared with today.
Sees fair value at US$318.81, based on analyst assumptions that also factor in share count declining about 4.1% a year and a discount rate near 7%.
🐻 Marathon Petroleum Bear Case
Fair value in this more cautious narrative: US$265.06 per share
Implied premium to this fair value versus the last close of US$266.17: about 0.4%
Revenue growth assumption in this view: revenue is assumed to decline about 0.23% a year
Emphasizes that earnings still lean heavily on fossil fuel refining, with exposure to environmental policy shifts, long term demand questions and the pace of electrification and alternative fuels.
Assumes revenue is broadly flat to slightly lower, while net margins rise from 3.4% to 5.3% by 2029 and the P/E contracts from 16.5x to 11.8x, with buybacks reducing the share count by about 4% a year.
Anchors fair value around the analyst consensus target of US$265.06, with a wide target range between US$186.00 and US$335.00 that reflects debate about long term refining economics, oil prices and capital allocation.
Both narratives use the same current share price, but they describe different potential paths for future demand, margins and valuation multiples. Your own view on those moving parts ultimately determines which fair value feels closer to your expectations, or whether you sketch out a third narrative of your own.
See what the community is saying about Marathon Petroleum
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.
Companies discussed in this article include MPC.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com