Marathon Petroleum Corp (MPC)

Conclusion

Marathon Petroleum is a US downstream energy company. It refines crude oil at Gulf Coast, Mid-Continent and West Coast refineries, runs midstream logistics and pipelines, and produces renewable diesel. On 9 November 2026 the shares closed at 389.88 USD, giving a market capitalisation of 106.16 billion USD and an enterprise value of 127.00 billion USD.

The verdict is undervalued. Against their own ten-year medians, the price-to-earnings ratio stands at 7.26 against 11.73, the EV/EBITDA at 5.05 against 7.17, and the price-to-free-cash-flow at 5.09 against 8.45. The fair value band runs from 844.90 to 1,267.36 USD, with a midpoint of 1,056.13 USD and a margin of safety of 170.9% at the current price. The discounted cash flow gives 1,526.61 USD per share, and the fair value from historical multiples is 585.66 USD. The reverse DCF implies revenue growth of -13.5% a year, against revenue growth of 13.7% a year over the last five years. The price therefore assumes a shrinking business, while the company has grown over five years.

What holds the case up is the return on invested capital of 41.5% against a weighted cost of capital of 7.7%, the Altman Z-score of 4.15, and free cash flow conversion of 142.5% over the last twelve months. What would break it is the three-year decline in earnings per share of -22.2%, the next-year earnings estimate of -12.1%, and the price-to-book ratio of 4.57 against a median of 2.34.

Financial health

Financial strength is green, held up by the Altman Z-score of 4.15, net debt to EBITDA of 0.83, interest coverage of 14.6 times and a current ratio of 1.45. The quick ratio is 1.07 and debt to equity is 1.48, which is higher and deserves attention. The Altman Z-score of 4.15 places the company in the safe zone. The Altman model was designed for manufacturers, and this company is one. Insolvency risk is low, about 0.8% by the estimate of the Ohlson model over one to two years. Debt has fallen over five years, with a change of -13.0% a year against revenue growth.

Earnings quality

Earnings quality is green. Free cash flow conversion is 142.5% over the last twelve months and 96.5% over five years, and the accrual ratio is -5.1%, which means cash earnings are slightly ahead of reported earnings. Free cash flow after stock-based compensation is 20.84 billion USD, but the stock-based compensation ratio to revenue is not available in the data. The share count fell at a compound rate of -14.0% over five years, which reflects buybacks. The Piotroski score is 7 out of 9. The Beneish M-score of -2.75 points to an unlikely risk of earnings manipulation. The company beat estimates in seven of the last eight quarters. Estimate revisions have been positive over the last 30 days, with 14 upgrades and 2 downgrades for the current year and 15 upgrades and 2 downgrades for the next.

Profitability

Profitability is green. The gross margin is 15.6% against a ten-year median of 7.5%, the operating margin is 12.0% against 4.2%, and the net margin is 8.4% against 3.1%. The operating margin has been stable relative to its history, with a stability value of 2.27. Return on invested capital is 41.5% against a weighted cost of capital of 7.7%, and the given difference is 33.8%. The five-year median return on invested capital is 14.7%. Return on equity of 63.0% is inflated by leverage. The DuPont split shows a net margin of 3.05%, an asset turnover of 1.55 and an equity multiplier of 4.94.

Growth

Growth is red. Revenue has compounded at -9.2% over three years, 13.7% over five years and 6.3% over ten years. Revenue grew in 5 of the 10 comparable years. Earnings per share fell at -22.2% over three years, but grew at 9.7% over ten years. Free cash flow per share fell at -16.7% over three years and grew at 15.1% over ten years. The next-year earnings estimate shows a growth rate of -12.1%, so near-term earnings are expected to decline after the recent rise.

Valuation

Valuation is green. The price-to-earnings ratio is 7.26 against a ten-year median of 11.73, a discount of 38.2%. EV/EBITDA is 5.05 against 7.17, a discount of 29.6%. The price-to-free-cash-flow ratio is 5.09 against 8.45, a discount of 39.8%. The price-to-sales ratio is 0.61 against 0.42, a premium of 44.6%, and the price-to-book ratio is 4.57 against 2.34, a premium of 95.7%. The discounted cash flow gives 1,526.61 USD per share at a discount rate of 8.87%, and 56.9% of its value sits in the terminal value. The fair value band rests on fixed assumptions, including a 5% equity risk premium and capped growth, so it is an order-of-magnitude estimate rather than a price target. The dividend yield is 1.1%, with a payout of 5.6% of free cash flow.

Risks

Declining earnings is the main weakness. A three-year earnings decline of -22.2% and a next-year estimate of -12.1% suggest that the current cash earnings may not persist, which would weaken the discounted cash flow case. The price-to-book premium of 95.7% shows that the balance sheet carries a high valuation relative to its book value, and the return on equity of 63.0% depends on leverage. The discounted cash flow depends heavily on its terminal value, which makes up 56.9% of the value. The stock-based compensation ratio is not available, so its effect on earnings quality cannot be measured. This analysis has no debt maturity schedule and no revenue breakdown by segment, so refinancing risk and the sensitivity of each business line cannot be assessed.