ExxonMobil Holdings Corporation XOM stock is trading at an 8.59x 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 6.66x. BP plc BP and Chevron CVX, belonging to the same space, are trading at 2.69x and 7.36x, respectively.
Is it worth buying XOM at a premium price right away? To find out, let’s delve into the business fundamentals and the overall crude pricing environment as the integrated energy giant generates the king size of its earnings from upstream operations.
Oil Price May Remain High: Boon for XOM’s Operations?
West Texas Intermediate (“WTI”) crude is trading at more than $98 per barrel. The high prices are being driven by intensifying conflicts in the Middle East. The U.S. Energy Information Administration in its latest short-term energy outlook projected WTI at $88.21 per barrel this year, higher than $65.40 last year. A highly favorable oil pricing environment is likely to continue supporting ExxonMobil’s exploration and production activities, similar to BP and Chevron.
The company has a massive 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 new drilling techniques and artificial intelligence to boost and optimize production volumes at lower cost structures. On its third-quarter 2026 call, the integrated major mentioned that in the prolific basin it is now operating three automated drilling rigs, and planning to increase the count to 25% of the total fleet in the basin next year. By 2028, ExxonMobil is planning to boost the proportion to 50%, to further lower its cost structures amid technological advancements.
Refining Efficiency and Financial Flexibility Strengthen XOM
Considering its downstream business, ExxonMobil's investments in upgrading its U.S. refineries should help the company produce more high-value fuels, particularly diesel. By making better use of existing facilities, XOM can expand output without the high costs of building new refineries. These improvements are expected to support stronger profit margins and cash flow over the long term.
Moreover, XOM has a strong balance sheet, on which it could rely when the business environment turns unfavorable. During the September quarter of this year, the company lowered its debt by more than $9 billion.
Time to Bet on XOM?
Considering the price chart, ExxonMobil has jumped 57.6% over the past year, outpacing the industry’s 57.3% growth. BP and Chevron have gained 36.3% and 48.8%, respectively, over the same period.
With the outperformance, XOM stock is currently pricey. But it is worth paying the premium since the outlook for the company’s overall business environment seems bright. Hence, investors should bet on the stock, which currently carries a Zacks Rank #2 (Buy). 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).