Warning: long post ahead!
In the tables below you will find my analysis of the
petrochemical giants Exxon and Mobil. Since I bought
into both of these stocks in my pre-Foolish days, I
decided to apply the Rule Maker criteria to them to
see just how smart I was. Granted, the oil business
is a much more capital-intensive and cyclical business
than most of the current Rule Makers, so this whole
exercise may be like comparing apples to oranges. In
any event, here's what I got:
Table #1: EXXON
Financial AnalysiCompany Being Evaluated Competitor #1 Competitor #2 Competitor #3
EXXON (XON) Mobil BP Amoco Shell Oil
Current Period Year-ago PeriodYear-over-Year Current Period Current Period Current Period
98Q4 (12/98) 97Q4 (12/97) Growth 98Q4 (12/98) 98Q3 (9/98) 98Q4 (12/98)
Income Statement . . .
Sales 29,139 35,062 -16.9% 13,182 7,457 15,451
Cost of Goods S 10,557 14,514 -27.3% 8,458 3,451 10,723
Net Income 1,460 2,500 -41.6% (152) 295 (1,727)
Shares Outstand 2,428 2,457 -1.2%
Balance Sheet . . .
Cash & Equivale 1,461 4,047 -63.9% 714 657 322
Current Assets 17,593 21,192 -17.0% 8,731 5,311 4,048
Short-term Debt 4,248 2,902 46.4% 3,982 973 5,301
Current Liabili 19,412 19,654 -1.2% 12,946 5,213 8,838
Long-term Debt 4,530 7,050 -35.7% 3,719 5,257 490
1 1 1
Margins & Ratios . . . Competitors' Average
Gross Margins 63.8% 58.6% 5.2 35.8% 53.7% 30.6% 40.1%
Net Margins 5.0% 7.1% -2.1 -1.2% 4.0% -11.2% -2.8%
Cash-to-Debt 0.17 0.41 -59.1% 0.09 0.11 0.06 0.09
Net Cash -7317.0 -5905.0 N/A -6987.0 -5573.0 -5469.0 -6009.7
Fool Flow Ratio 1.06 1.02 3.9% 0.89 1.10 1.05 1.02
Continue Here
Ranking Rule Makers
1) Brand Points (0-1) 3) Financial Dire Points (0-3)
Familiarity 1 Sales Growth 0
Openness 1 Gross Margins 3
Optimism 1 Net Margins 1
Legitimacy 1 Shares Outstandin 3
Inevitability 1 Cash-to-Debt 0
Solitariness 0 Fool Flow Ratio 0
Humor 0 Expansion Potenti 2
Subtotal 5 Subtotal 9
2) Financial Loca Points (0-2) 4) Monopoly Statu Points (0-4)
Mass Market Habit 2 Gross Margins 4
Gross Margins 2 Net Margins 4
Net Margins 0 Net Cash 4
Cash-to-Debt 0 Fool Flow Ratio 0
Fool Flow Ratio 1 Convenience 2
Your Interest 1 Subtotal 14
Subtotal 6
5) Your Enjoymen 1
Total Score 35 Third Tier
Table #2: MOBIL
Financial AnalysiCompany Being Evaluated Competitor #1 Competitor #2 Competitor #3
MOBIL (MOB) Exxon BP Amoco Shell Oil
Current Period Year-ago PeriodYear-over-Year Current Period Current Period Current Period
98Q4 (12/98) 97Q4 (12/97) Growth 98Q4 (12/98) 98Q3 (9/98) 98Q4 (12/98)
Income Statement . . .
Sales 13,182 16,574 -20.5% 29,139 7,457 15,451
Cost of Goods S 8,458 10,276 -17.7% 10,557 3,451 10,723
Net Income (152) 704 N/A 1,460 295 (1,727)
Shares Outstand 781 783 -0.3%
Balance Sheet . . .
Cash & Equivale 714 820 -12.9% 1,461 657 322
Current Assets 8,731 9,722 -10.2% 17,593 5,311 4,048
Short-term Debt 3,982 2,994 33.0% 4,248 973 5,301
Current Liabili 12,946 12,421 4.2% 19,412 5,213 8,838
Long-term Debt 3,719 3,670 1.3% 4,530 5,257 490
1 1 1
Margins & Ratios . . . Competitors' Average
Gross Margins 35.8% 38.0% -2.2 63.8% 53.7% 30.6% 49.4%
Net Margins -1.2% 4.2% -5.4 5.0% 4.0% -11.2% -0.7%
Cash-to-Debt 0.09 0.12 -24.7% 0.17 0.11 0.06 0.12
Net Cash -6987.0 -5844.0 N/A -7317.0 -5573.0 -5469.0 -6119.7
Fool Flow Ratio 0.89 0.94 -5.3% 1.06 1.10 1.05 1.07
Continue Here
Ranking Rule Makers
1) Brand Points (0-1) 3) Financial Dire Points (0-3)
Familiarity 1 Sales Growth 0
Openness 1 Gross Margins 1
Optimism 1 Net Margins 0
Legitimacy 1 Shares Outstandin 3
Inevitability 1 Cash-to-Debt 0
Solitariness 0 Fool Flow Ratio 2
Humor 0 Expansion Potenti 2
Subtotal 5 Subtotal 8
2) Financial Loca Points (0-2) 4) Monopoly Statu Points (0-4)
Mass Market Habit 2 Gross Margins 0
Gross Margins 0 Net Margins 0
Net Margins 0 Net Cash 0
Cash-to-Debt 0 Fool Flow Ratio 2
Fool Flow Ratio 2 Convenience 2
Your Interest 1 Subtotal 4
Subtotal 5
5) Your Enjoymen 1
Total Score 23 Fourth Tier
As you can see, neither one of these companies matches
up especially well to the Rule Maker criteria. A
certain amount of blame can be placed on the glut of
oil that has been present in the market for the past
year thanks to our friends at OPEC. Since they have
now decided to tighten the spigots a bit, then the
profitability should start returning to both Exxon and
Mobil. It will be interesting to see what happens to
the numbers over the next several quarters as the
price of oil climbs upward and the proposed Exxon
Mobil merger goes through.
As always, post any questions and comments.
Fool On!
the LanceMan
