Marathon Petroleum (MPC) is drawing attention after its stock outperformed major indices, gaining 1.41% in the latest session and rising 27.51% over the past month ahead of its August 4 earnings release.

At a share price of $315.82, Marathon Petroleum has recently given investors a strong run, with a 30 day share price return of 27.71% and a year to date share price return of 91.24%. The 5 year total shareholder return is very large at more than 7x, suggesting momentum has been strong over both shorter and longer horizons as attention builds ahead of the August 4 earnings release and expectations for higher earnings per share compared to last year.

If Marathon Petroleum’s move has you looking across the energy value chain, it could be a good time to scan other power related plays through the 36 power grid technology and infrastructure stocks

For Marathon Petroleum, such a fast move and very large multiyear return can signal either a market reassessment of the underlying business or a burst of optimism that ran ahead of fundamentals. So how does the current valuation stack up?

Most Popular Narrative: 90% Undervalued

Compared with Marathon Petroleum’s last close at $315.82, the most widely followed narrative suggests a fair value near $318.81, with pricing anchored using a 6.98% discount rate.

MPLX plans to direct about 90% of US$2.4b of growth capital into Natural Gas and NGL services in the Permian and Marcellus, areas linked to rising LNG exports and power demand. These investments can support mid-teens project returns, Midstream adjusted EBITDA and cash distributions to Marathon Petroleum.

Want to see what is baked into that fair value for Marathon Petroleum? The narrative leans on higher margins, larger earnings and a richer midstream mix. Curious how those pieces fit together into today’s valuation math?

Result: Fair Value of $318.81 (UNDERVALUED)

However, this Marathon Petroleum narrative hinges on major projects and demand assumptions; construction setbacks or weaker refined product consumption could quickly challenge the bullish case.

Another View: Marathon Petroleum on Earnings Multiples

While the SWS DCF model suggests Marathon Petroleum is undervalued, the picture changes when you look at the P/E ratio. At 19.9x, the stock trades above the US Oil and Gas industry at 14.3x, the peer average at 18.8x, and a fair ratio of 17x. This points to valuation risk if sentiment cools.

That gap between the current P/E and the fair ratio raises a simple question for investors: is the recent share price strength already pricing in a lot of good news, or is the market still willing to pay a premium for Marathon Petroleum’s profile?

Next Steps

With sentiment clearly split between strong past returns and questions around valuation, now is the moment to look through the data yourself and decide how Marathon Petroleum fits your portfolio. To weigh both sides of the story in one place, review the 2 key rewards and 2 important warning signs

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.