Have you been paying attention to shares of Marathon Oil (MRO)? Shares have been on the move with the stock up 17.7% over the past month. The stock hit a new 52-week high of $25.76 in the previous session. Marathon Oil has gained 55.8% since the start of the year compared to the 26.5% move for the Zacks Oils-Energy sector and the 51.8% return for the Zacks Oil and Gas - Integrated - United States industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on February 16, 2022, Marathon Oil reported EPS of $0.77 versus consensus estimate of $0.55.
For the current fiscal year, Marathon Oil is expected to post earnings of $3.12 per share on $6.22 billion in revenues. This represents a 98.73% change in EPS on a 13.79% change in revenues. For the next fiscal year, the company is expected to earn $2.52 per share on $5.66 billion in revenues. This represents a year-over-year change of -19.13% and -9.09%, respectively.
Valuation Metrics
Marathon Oil may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Marathon Oil has a Value Score of D. The stock's Growth and Momentum Scores are B and C, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 8.2X current fiscal year EPS estimates, which is not in-line with the peer industry average of 12X. On a trailing cash flow basis, the stock currently trades at 6X versus its peer group's average of 9.9X. Additionally, the stock has a PEG ratio of 0.57. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Marathon Oil currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Marathon Oil fits the bill. Thus, it seems as though Marathon Oil shares could have potential in the weeks and months to come.
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Marathon Oil Corporation (MRO): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
