Marathon Oil Corporation (MRO) Stock Seems Well Poised For A Rally

Shifting focus to Anadarko Petroleum Corporation, its shares appear to be overvalued with a forward P/E of 19.33x and a PEG of 4.57x.  Moreover its debt/equity ratio of 69% and debt/capital ratio of 36% are pretty high compared to its counterparts. Analysts expect its annual EPS growth to average around a modest 4.73% for the next 5 years. In addition the company reported disappointing numbers, with revenues declining by 3.4% YoY. Even though its production rose on a YoY basis, its net profit margin is the lowest amongst its peers, which is definitely not a good sign.

Brent Crude Oil Spot Price data by YCharts

Brent Crude Oil Spot Price data by YCharts

Over the last 5 years, oil prices have declined from $140 in 2008 to $110 levels, and it’s understandable that the margins of oil companies have remained under pressure. But the net income and free cash flows of Apache Corporation have dipped way more than the respective metrics of Marathon Oil. Over the last year, shares of Anadarko Petroleum have lost 4.5%, whereas Marathon Oil’s market cap has appreciated by 4.12%.

A Short Conclusion

I believe that Marathon Oil offers more upside than Anadarko Petroleum.  The $25 billion lawsuit against Anadarko, which was originally filed by Tronox, and later taken up by EPA, had been causing a drag on its share price.  Its dividend yield of 0.46% is also unimpressive, which altogether is not as lucrative as Marathon Oil.

Marathon Oil sports a solid balance sheet and is ramping up its production, which would definitely power up its stock. Shares of Marathon Oil trade at a forward P/E of 9.95x, indicating that its shares are still undervalued, and analysts expect its EPS growth next year to be around 24.23%. Marathon Oil undoubtedly gets a Foolish Buy rating.

The article This Stock Seems Well Poised For A Rally originally appeared on Fool.com and is written by Piyush Arora.

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