Marathon Oil Corporation (MRO) is a worldwide oil and gas refining company in the business of exploration, development, production and marketing of crude oil, petroleum products, liquid hydrocarbons, natural gas and methanol.
Over the past year, Marathon has been downgraded several times by two analysts. Currently five of nine analysts reporting to MSN Money recommend Marathon as a strong buy. In April of this year Oppenheimer upgraded Marathon and has a $60.00 price target, expecting the stock to climb 26% over the next year.
Since April however, Marathon’s stock price has declined $5.00, more than 10%. It is quite likely that Oppenheimer could not see the future rollercoaster that this summer has placed on the stock market and the oil industry. With the market possibly nearing some state of stability near the bottom of its decline, it may be time to look at investing in the energy sector, specifically Marathon Oil Corp. (MRO).
Through my own analysis, I have come to the conclusion that Marathon is an undervalued company. Marathon’s EPS growth rate over the last ten years is 30%. Their equity growth rate is 16% and their sales growth rate is 12%, all of which meet my criteria (10% growth) to analyze the company further.
My research shows a solid company with growth potential. With the growth rates from the past ten years, the ten year future value of the stock would be $600. This creates a current value of $160. My stock trading strategy requires that you divide the current value in half to determine whether or not to purchase the stock. This gives us a price target of $80. Currently Marathon (MRO) is trading at $43.62, obviously very undervalued and the opportunity for significant gains is there.
Yahoo! Finance states that Marathon’s corporate governance is better than 95% of companies in the energy sector. CEO Clarence Cazalot has more than thirty years of experience in the oil industry. He has worked for several companies including Texaco and Frontier. Mr. Cazalot also serves on the Board of Directors for Baker Hughes, the US-Saudi Arabian Business Council, The American Petroleum Institute and the National Association of Manufacturers. He states that Marathon is “committed to and focused on sustainable value growth,” which includes projects planned out past 2012.
The Marathon Oil Corporation (MRO) is also one of the companies involved in the Calgary oil patch opportunity. Where they are still waiting for Congress to lift restrictions, and when they do, Marathon is part of a group that would generate in excess of one million barrels daily. Where it remains unknown when these oil sands and oil shale production would begin, Marathon’s position can only get better.
Marathon Oil Corporation (MRO) is a good company in the energy sector. The stock seems undervalued and has the potential of 11% growth per year over the next ten years. On top of its growth potential, Marathon has a dividend/yield of 0.96 (2.2%). Marathon can best be described as a long-term investment, and this investor’s opinion, it will more than likely prove itself a valuable asset in your portfolio.