While the S&P 500 is up 13.5% since February 2026, ExxonMobil (currently trading at $159.68 per share) has lagged behind, posting a return of 6.5%. This might have investors contemplating their next move.
Is now the time to buy ExxonMobil, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is ExxonMobil Not Exciting?
We’re cautious about ExxonMobil. Here are two reasons you should be careful with XOM, plus one stock we’d rather own.
1. Low Gross Margin Hinders Flexibility
In any given year, energy gross margins are heavily influenced by prices, hedging, and cost inflation, but over a full cycle these gross margins reveal which producers are structurally advantaged through superior “rock” quality, infrastructure access, and cost position.
ExxonMobil, which averaged 43.9% gross margin over the last five years, exhibits subpar unit economics in the sector. It means the company will struggle more at lower commodity prices than peers with better gross margins.
2. Shrinking EBITDA Margin
Adjusted EBITDA margin strips out accounting distortions tied to depletion and historical drilling spend, providing a clearer view of the cash-generating power of the underlying asset base before financing and reinvestment decisions.
Analyzing the trend in its profitability, ExxonMobil’s EBITDA margin decreased by 1.3 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. ExxonMobil’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers. Its EBITDA margin for the trailing 12 months was 20.5%.
Final Judgment
ExxonMobil’s business quality ultimately falls short of our standards. With its shares underperforming the market lately, the stock trades at 13.2× forward P/E (or $159.68 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We’re fairly confident there are better investments elsewhere. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.
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