Current versus historical valuation
So far in this series, we have discussed Marathon Oil’s (MRO) market performance, technical indicators, and price forecast. In this part, we’ll analyze Marathon Oil’s current valuation compared to its peers and historical levels.
Marathon Oil was trading at a forward price-to-CFFO (cash flow from operation) of 5.6x, which is below the five-year and three-year average of 6.4x and 7.2x. Analysts expect Marathon Oil to post CFFO growth of 64% year-over-year in 2018. The CFFO growth rate is expected to be 23.0% and 10.5% in 2019 and 2020, respectively. In 2018, the company’s CFFO growth is above the industry median of 57.7%.
Marathon Oil’s current forward price-to-CFFO ratio is below the peer average of 7.0x. Devon Energy (DVN) and Continental Resources (CLR) were trading at forward price-to-CFFO ratios of 6.4x and 6.7x, respectively. Devon Energy and Continental Resources are expected to post 3.3% and 69.0% CFFO growth in 2018.
Next, we’ll discuss the recent institutional activity in Marathon Oil.