Exxon Mobil Corporation (XOM) Stock Is Going Nowhere

In defense of ExxonMobil stock
Now don’t get me wrong. Exxon Mobil Corporation (NYSE:XOM) isn’t all bad. To the contrary, as the following chart shows, when it comes to producing cash from its business, Exxon is actually one of the better performers in the oil industry:

XOM Free Cash Flow Yield data by YCharts

That said, Exxon’s only “better” in comparison to the competition — and “better” isn’t quite the same as “good.”

Foolish takeaway
Right now, Exxon Mobil Corporation (NYSE:XOM) stock boasts a free cash flow yield (that’s the amount of cash profit it produces, divided by the company’s market cap) of just 4%. That’s a better number than the 1.3% FCF yield at Chevron Corporation (NYSE:CVX), and much better than what cash-burning BP plc (ADR) (NYSE:BP) reports. But few investors, I suspect, get into this business in hopes of buying a company that can take a dollar of investment and turn it into just four pennies’ worth of profits.

If you ask me, the fact that Exxon Mobil Corporation (NYSE:XOM) generates only a 4% free cash flow yield does little to argue in favor of ExxonMobil stock as a good investment. What it really tells you is that if Exxon is the best the oil industry can offer, maybe it’s better to stay away from oil companies altogether. Because just like ExxonMobil stock itself, the rest of these companies are also going nowhere.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Chevron.

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