This MRO Stock Forecast article was written by Yuxiao Yang – Financial Analyst at I Know First.

Highlights

• Marathon Oil will be highly profitable by the significant uptrend in commodity price levels.
• MRO reported $1.3 billion of net income in the first quarter of 2022 compared to a net income of $97 million in the same period last year.
• Marathon Oil returned 50% of cash flow from operating activities to equity investors and repurchased $900MM in stock YTD1 and raised outstanding buyback authorization to $2.5B during Q1 2022.

Overview

Marathon Oil was founded as an independent exploitation and production company in July of 2011. Its headquarters are located in Houston Texas and are located by some of the largest oil plantations in the country, including Texas, North Dakota, Oklahoma, and New Mexico. MRO focuses on providing a sustainable method to produce oil and gas in mass quantities that is safe and ethical to the environment. Its services are highly multifaceted, ranging from the production of crude oil, natural gas, and oil sands; and partnered with Marathon Petroleum Corporation, headquartered in Findlay, Ohio, the two companies are engaged in the redefining and distribution of automotive fuel, engine oil.

Favorable Financial Outlook

The escalation of the Russia-Ukraine war led to a noticeable rise in crude oil prices. As long as there is no huge COVID comeback, the macro environment should thus be quite supportive of oil prices going forward. The rise of commodity prices will bring potential opportunities to the oil drilling and gas extraction industry.

According to the most recent 10-Q form, MRO reported $1.3 billion of the net income in the first quarter of 2022 compared to the net income of $97 million in the same period of last year. The United States segment income in the first quarter of 2022 was $661 million of income compared with a $212 million income for the same period in 2021. International segment income in the first quarter of 2022 was $115 million of income compared with the $50 million of income for the same period in 2021. At the same time, Marathon generated significant positive cash flow from operations during the first three months of 2022 given the recent commodity price cycle. Cash flows generated from operating activities in the first three months of 2022 were 72% higher than the same period in 2021, primarily due to higher realized commodity prices. Strong financial performance shows positive signals to investors. Marathon returned 50% of cash flow from operating activities to equity investors and repurchased $900MM in stock YTD1 and raised outstanding buyback authorization to $2.5B during Q1 2022.

According to GuruFocus, MRO outperformed most of the companies in the Oil & Gas industry. MRO’s ROE is19.88% that better than 78.26% of companies in the Oil & Gas industry. The Net Margin is 34.81%, which is higher than 87.15% of companies in the industry. Moreover, the company has one of the highest 3-year free cash flow growth in the industry which allows to the company allocate money to its investors through buybacks.

Let’s look at the next comparable companies: DVN, CTRA, FANG, CLR, and OVV. MRO’s current P/E and P/B ratios of 10.09 and 1.77 are lower than average and median numbers, respectively, while the P/S ratio is 3.49 that higher on average compared with MRO peers. Taking into account the company’s solid financial performance, and other factors we have discussed, these price ratios can signal the attractiveness of MRO’s stock.

The Yahoo Finance coverage for the company is performed by 27 analysts: 4 and 8 of them take Strong Buy and Buy positions, while 13 of them take the Hold position. The analysts’ community puts the average target price for the stock at $32.72 while it is currently traded at $28.08.

The Altman Z-score, which determines the result of a credit test, stays on the border of the Grey and the Safe zones. At the same time, MRO looks interesting in terms of the Piotroski F-Score. Piotroski F-score is a number between 0 and 9 that is used to assess the soundness of a company’s financial position. A score of 8 may indicate that the company’s stock is undervalued and can be interpreted by investors as a good signal to buy the stock.

Conclusion

It’s reasonable to believe MRO is a buy stock. MRO expects to be beneficial from the noticeable uptrend in commodity price. Increasing international crude oil prices and healthy financial performance give the company more opportunities and a better ability to outperform other risks.

It is worth paying attention that the stock-picking AI of I Know First has a high signal on the one-year market trend forecasts, supporting my position for the MRO stock forecast. The dark green is a strong bullish signal for all forecast horizons.

Past Success With MRO Stock Forecast

I Know First has been bullish on the MRO stock forecast in the past. I Know First analyst published a premium article on March 25^th, 2021 about the great MRO’s stock potential in the coming year. We can notice a significant one-year return of 149.43% that an investor could have If he bought MRO’s stock according to the analyst’s advice.

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Please note-for trading decisions use the most recent forecast.