ExxonMobil Stock: Buy at a Premium or Wait for a Better Entry?

Exxon Mobil Corporation XOM is currently considered expensive on a relative basis, with the stock trading at a 9.78x trailing 12-month Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortization (EV/EBITDA), which is a premium compared with the broader industry average of 5.87x. XOM is also expensive compared to other integrated giants like BP plc BP and Chevron Corporation CVX. BP is currently trading at about 3.33x trailing 12-month EV/EBITDA, while Chevron trades at roughly 9.52x on the same basis.

Such a premium valuation often signals strong market confidence in ExxonMobil’s prospects. However, this elevated price necessitates a thorough assessment of the company’s fundamentals, growth potential and prevailing market conditions to check if it is justified.

Key Upstream Assets Fueling XOM’s Long-Term Outlook

XOM has a strong footprint in the Permian, the most prolific oil and gas play in the United States, and offshore Guyana. In the Permian, the integrated giant has been employing lightweight proppant technology and hence has been capable of boosting its well recoveries by up to as much as 20%.

In Guyana, XOM has made several oil and gas discoveries, further highlighting its solid production outlook. Record production from both resources has been aiding its top and bottom lines. Importantly, in both resources, the breakeven costs are low, thereby aiding XOM in continuing its upstream business even during a low crude pricing environment.

In its recent corporate plan update, ExxonMobil projects its total production from upstream operations to increase to 5.5 million oil equivalent barrels per day by the end of this decade. The energy behemoth added that its advantageous assets, which include the Permian, Guyana and LNG, will be responsible for 65% of the total volumes. 

Resilient Refining & Conservative Capex Boost XOM’s Outlook

XOM’s resilient refining operations give support when oil prices turn low, and the upstream business suffers. The refining business strengthened materially in 2025, with higher margins, record throughput in North America, structural portfolio improvements and strong year-over-year earnings growth. While first-quarter 2026 faces seasonal maintenance impacts, the 2025 results reflect a structurally improved Energy Products segment rather than a purely cyclical rebound.

The energy giant also has a conservative capital spending strategy while maintaining strong productivity. The integrated major expects its earnings and cash flows to improve without increasing its capital spending, which is a strong positive.

By the end of this decade, XOM expects its return on capital employed (ROCE) to exceed 17%. The company also has a strong focus on returning capital to shareholders, as reflected by the fact that on the S&P 500, it is the second-largest payer of dividends. XOM has hiked dividends consecutively for more than four decades and has an aggressive share buyback program.

Should Investors Bet on XOM Now?

XOM’s favorable long-term outlook is reflected in the price chart. Over the past year, ExxonMobil has jumped 41.2%, outpacing the 26.5% growth of the industry’s composite stocks, and 6.6% and 17.7% improvements of BP and CVX, respectively.

One-Year Price Chart

However, with XOM generating the king size of its earnings from upstream operations, the company’s business is highly vulnerable to the volatility in commodity prices. Also, with the U.S. Energy Information Administration expecting oil prices to decline significantly this year from last year, XOM’s upstream business, like CVX and BP, will likely be under pressure. Thus, investors should not rush to bet on the stock right away. Those who have already invested can hold on to it.

ExxonMobil currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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