IMO

We rate IMPERIAL OIL LTD (IMO) as a Hold with a composite score of 54.6/100 at a current price of $115.54. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (85th percentile) and quality (58th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (33th percentile) and value (52th percentile) tempers our overall conviction. We assign a Narrow Moat rating (50/100), Low uncertainty, and Standard capital allocation.

Key items to watch: quarterly earnings execution and sector-level competitive dynamics. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

IMPERIAL OIL LTD holds a top-quartile position (#0 of 50) within the Mining sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 54.6/100 places it at rank #1327 in our full 7,333-stock universe. With a $46.2B market capitalization, IMPERIAL OIL LTD operates at meaningful scale within the Mining sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue contraction of -10% combined with momentum at the 54th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 22% (-21.2pp vs sector) narrow to operating margins of 11% (-1.6pp vs sector) and net margins of 8.1%, yielding a gross-to-net conversion rate of 37%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $115.54, IMPERIAL OIL LTD is trading near fair value based on current fundamentals. Our value factor score of 52/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 14.5x (roughly in line with the sector median of 13.7x), EV/EBITDA of 11.2x (at a premium), P/B of 2.6x, P/S of 1.2x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Low uncertainty rating to IMPERIAL OIL LTD. The company exhibits strong financial stability with a beta of 0.74, and a stability factor in the 85th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

We identify no major risk factors at this time. The company's stability factor sits at the 85th percentile with quality at the 58th percentile, both of which support our low-risk assessment. The absence of material leverage, profitability, or volatility concerns reduces the likelihood of a permanent capital loss scenario.

Key risk mitigants include: above-average stability (85th percentile) suggests predictable business dynamics; a 2.18% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate IMPERIAL OIL LTD's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 18.0%, and the balance sheet is managed within acceptable parameters (D/E: 90%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; IMPERIAL OIL LTD falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 2.18% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, IMPERIAL OIL LTD receives a Hold rating with a composite score of 54.6/100 (rank #1327 of 7,333). Our quantitative framework assigns a Narrow Moat (50/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 56/100.

Our analysis supports a neutral stance on IMPERIAL OIL LTD. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.