Will Exxon’s New Record Boost Ailing Stock?

This is the third time I have written about Exxon Mobil breaking the record for the largest profit ever reported by a U.S. corporation and I’ve only been blogging since April!

This time Exxon Mobil reported net income of $14.83 billion for the third quarter of 2008.  The new record reflects a 58 percent increase in profits over the same quarter last year.  Wall Street’s response: XOM shares traded up 0.54 percent.

With profits like this, wouldn’t you expect Exxon Mobil’s stock to have a record-breaking year?

Ironically, the opposite is true.  In 2008, shares of Exxon Mobil have fallen 19 percent.

In taking a look at Exxon Mobil versus BP and Chevron, XOM is by far the largest with a market cap of $389 billion (more than BP and Chevron combined).  Exxon has a price-to-earnings ratio of 9.29 whereas BP and Chevron come in at 6.15 and 7.87, respectively.  According to yahoo, the average P/E for the industry is 6.10.  The price-to-sales ratio tells the same story.

So from a fundamental perspective, it appears that Exxon Mobil is overvalued.

Oil prices have fallen substantially since the end of Q3, so that has dampened expectations for another record breaking quarter.  Regardless, this year will end on an extremely profitable note for Exxon Mobil. 

BTW, don’t get too comfortable at the pump.