Chevron Corporation (CVX) is believed to be a better pick than its industry peer Exxon Mobil (XOM) due to a slightly higher multiple of 1.5x sales compared to almost 1.3x revenues for XOM. This valuation gap is expected to further expand in favor of CVX over the coming years. Factors such as historical revenue growth, returns, and valuation are compared in detail, with CVX projected to outperform XOM in the next three years. Despite XOM’s strong gains in the last three years, CVX is deemed to be a better choice overall.
CVX has seen better revenue growth in the last three years, with revenues rising at an average annual rate of 27.4% compared to XOM’s growth rate of 23.0%. Both companies have shown similar revenue growth in the last twelve months. Both CVX and XOM are expected to benefit from high oil prices and tight supplies, with strong balance sheets paving the way for longer-term gains. However, concerns surrounding Chevron’s acquisition of Hess and the implications for XOM’s partnership with Hess in Guyana have caused uncertainty for CVX shares, impacting its year-to-date performance.
XOM is noted to be more profitable and have a better cash cushion compared to CVX. XOM’s operating margin has grown significantly over the years, while CVX has also seen an expansion in its operating margin. Financial risks are comparable between the two companies, with CVX having a better debt position but XOM having a larger cash cushion. Despite XOM’s profitability and cash position, CVX’s revenue growth and debt position make it a more favorable choice in the long run.
Overall, CVX is projected to outperform XOM in the next three years, with an expected return of 2% for CVX compared to a -5% expected return for XOM. CVX is estimated to have a valuation of $173 per share, almost 10% higher than the current market price, while XOM’s valuation is expected to be $112 per share, in line with the current price. Despite XOM’s impressive stock performance in recent years, CVX is seen as the better choice based on revenue and return expectations for the future.
In conclusion, Chevron Corporation is believed to be a better investment option than Exxon Mobil based on a variety of factors such as revenue growth, profitability, and valuation. CVX’s strong performance in revenue growth and debt position make it a more favorable choice for investors, despite XOM’s profitability and cash cushion. Both companies are expected to benefit from high oil prices and tight supplies, with CVX projected to outperform XOM in the next three years. Investors may want to consider these factors when making investment decisions in the energy sector.
