What's the Latest on Downstream Major Marathon Petroleum?
Peer comparisons
Marathon Petroleum’s (MPC) market capitalization stands at ~$19 billion. By comparison, Valero Energy (VLO) and Phillips 66 (PSX) have market caps of ~$30 billion and ~$45 billion, respectively, while Tesoro (TSO) has a market cap of ~10 billion.
MPC is currently trading at a forward PE (price-to-earnings ratio) of 8.3x, which is below the peer average of 9.5x. But Valero and PBF Energy (PBF) are also trading below the average.
Below peer average
Lower oil prices coupled with higher demand for refined products are likely to boost Marathon’s EBITDA (earnings before interest, tax, depreciation, and amortization). We should note that rising EBITDA usually results in a lower EV-to-EBITDA (enterprise value-to-EBITDA) ratio—assuming that EV remains constant.
Marathon Petroleum is currently trading at the forward EV-to-EBITDA of 5.8x, which is on par with the peer average of 5.8x. Most of MPC’s peers are trading closer to the average forward EV-to-EBITDA, but Phillips 66 (PSX) is trading above average, at 7.1x forward EV-to-EBITDA.
Notably, the PowerShares Dynamic Large Cap Value ETF (PWV) has a ~11% exposure to energy stocks, including MPC, VLO, and PSX.
In the next and final part, we’ll analyze the correlation between MPC’s stock, crude oil, and the broad market indicators.
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