Now to see how XOM’s P/E ratio has varied over time—return back to the COMPANY OVERVIEW page. Next click FINANCIALS—GROWTH RATIOS and then select WORLDSCOPE—INCOME STATEMENT RATIOS. Is XOM’s current P/E ratio well above or well below its historical average? If so, do you have any explanation for why the current P/E deviates from its historical trend? On the basis of this information, does XOM’s current P/E suggest that the stock is undervalued or overvalued? Explain.

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.