Over the past eighteen months, integrated oil giant ExxonMobil (NYSE:XOM) has made a stunning recovery. During this timeframe, XOM stock has nearly tripled in price. Largely, of course, due to oil’s strong performance. As you know full well, the pandemic recovery, plus the geopolitical chaos in Eastern Europe, has sent oil back to late 2000s prices.

In turn, ExxonMobil, like its peers, has seen its earnings recover in a big way. Strong earnings, plus the fact fears of a dividend cut are no longer a major concern, has enabled shares to reach prices not seen since 2014.

With this big spike in price, you may be worried that you “missed out” on this opportunity. Even worse, you may think the stock is on the verge of topping out. Another 3x run may not happen anytime soon, but with two factors at play, ample runway remains.

Why XOM Stock Could Keep Climbing

Admittedly, the investing adage “let your profits run” is not an absolute rule. After all, a big change in fundamentals can send a market darling on a crash course toward the market graveyard. In the case of ExxonMobil, this adage may hold true. Why, two reasons.

The main factor behind the run-up in XOM stock (soaring oil prices) is still in play. I won’t try and predict where crude oil prices are going to be six months, a year, or several years from now. Trying to do so is next to impossible. That said, oil prices could stay high for quite some time.

Not only because of the Russia/Ukraine situation, although as this crisis continues, it’s certainly playing a role. There’s robust demand, from both the U.S. (despite the pain at the pump) and China (coming back from its latest virus lockdowns) for oil. Coupled with limited supply, and prices could remain at triple-digit levels. This will keep ExxonMobil very profitable.

That’s not all. Alongside the oil price factor, the company’s own efforts to maximize shareholder value also have a good chance of justifying a further move higher for shares.

The Latest on ExxonMobil’s Capital Allocation Efforts

A few months back, I discussed how it wasn’t just surging oil prices that made me bullish on XOM stock. I also saw management’s own efforts to move the needle for shareholders as a promising sign of higher prices ahead.

This includes cost reduction efforts, as well as capital allocation efforts. In other words, avoiding chancier exploration projects. So, what’s the latest on management’s more shareholder-friendly approach?

As seen in its most recent quarterly earnings release from April, ExxonMobil had encouraging updates from its high-potential exploration project in Guyana. It also announced plans to consolidate its downstream (refining/marketing) and chemical businesses into one business unit, to improve efficiency. It also announced plans to buy back up to a staggering $30 billion worth of its shares through 2023.

The story is unchanged from what it was a few months back. No matter oil’s next price direction, this second factor continues to be a strong potential catalyst for the stock. Management has learned from its past mistakes. It is smartly taking a more cautious approach with the profits stemming from the recent oil price bonanza. This approach could have a positive impact on its stock price, with far less uncertainty.

The Takeaway With XOM Stock

Currently, I give ExxonMobil stock an “A” rating in my Portfolio Grader. Again though, keep in mind that upside potential over the next year or two likely isn’t the degree seen over the past year or so.

Shares tripled in value due to crude oil itself making an outsized move. It’s best that you have reasonable expectations. That said, while another triple-digit percentage move may not be immediate, the opposite (a big drop ahead) isn’t likely, either. With demand outstripping supply, elevated oil prices are likely to continue.

Management is wisely putting the resultant profits to work in a way that’s most optimal for shareholders. To top things off, its valuation remains reasonable. Shares today trade for around 9.9x estimated 2022 earnings. Far from being at risk of topping out, if you don’t own XOM stock yet, it’s still worth buying it.

— Louis Navellier and the InvestorPlace Research Staff

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Source: Investor Place