To provide a starting point for gauging a company’s relative valuation, analysts often look at a company’s price-to-earnings (P/E) ratio. Returning to the COMPANY OVERVIEW page, you can see XOM’s current P/E ratio. To put this number in perspective, it is useful to compare this ratio with other companies in the same industry and to take a look at how this ratio has changed over time. If you want to see how XOM’s P/E ratio stacks up to its peers, click on the tab labeled PEERS. Click on FINANCIALS on the next row of tabs and then select KEY FINANCIAL RATIOS. Toward the bottom of the table you should see information on the P/E ratio in the section titled Market Value Ratios. Toward the top, you should see an item where it says CLICK HERE TO SELECT NEW PEER SET—do this if you want to compare XOM to a different set of firms. For the most part, is XOM’s P/E ratio above or below that of its peers? In Chapter 4, we discussed the various factors that may influence P/E ratios. Off the top of your head, can these factors explain why XOM’s P/E ratio differs from its peers?

Access the Thomson ONE problems though the ThomsonNOW Web site. Use the Thomson

ONE—Business School Edition online database to work this chapter’s questions.

Estimating ExxonMobil’s Intrinsic Stock Value In this chapter we described the various factors that influence stock prices and the approaches that analysts use to estimate a stock’s intrinsic value. By comparing these intrinsic value estimates to the current price, an investor can assess whether it makes sense to buy or sell a particular stock. Stocks trading at a price far below their estimated intrinsic values may be good candidates for purchase, whereas stocks trading at prices far in excess of their intrinsic value may be good stocks to avoid or sell.

While estimating a stock’s intrinsic value is a complex exercise that requires reliable data and good judgment, we can use the data available in Thomson One to arrive at a quick “back of the envelope” calculation of intrinsic value.