Refining giant Marathon Petroleum (NYSE:MPC) has done an exceptional job creating value for investors since its separation from oil and gas producer Marathon Oil (NYSE:MRO) in 2012. Shares are up more than 200% since then, while the company's total return after adding in the dividend is now nearly 280%. That has crushed the S&P 500's 177% total return over that time.

However, despite Marathon's excellent track record of creating shareholder value, at least one investor -- hedge fund Elliott Management -- believes it's leaving a substantial amount of money on the table. That's why Elliott is pressing Marathon to make changes it believes could unlock the latter's full potential. In Elliott's view, Marathon's shares could more than double in value.

Two miniature black barrels on a pile of money.

Image source: Getty Images.

Breaking up is hard to do

Elliott Management recently sent a letter to Marathon's board, calling on the company to take several actions to unlock value. For starters, it wants Marathon to separate into three independent companies:

This isn't the first time Elliott has requested that the company break apart. It initially advocated that Marathon pursue this path in 2016. While Marathon followed some of Elliott's suggestions, it didn't split into three separate companies. Instead, it accelerated the simplification of MPLX. It then pursued a different strategy by acquiring refining rival Andeavor Logistics.

These moves, however, haven't had the desired effect, as Marathon's total shareholder return since Elliott's initial approach is negative 13%. So Elliott is again pushing Marathon to consider breaking apart. In Elliott's estimation, these moves would unlock more than $22 billion in value for investors, boosting Marathon's share price by 61%.

One factor driving this view is that Marathon trades at a discounted price compared to its peers. Currently, the company sells at an enterprise value (EV)-to-EBITDA multiple of 5.0 times its projected 2020 EBITDA. For comparison's sake, refining peers Valero Energy (NYSE:VLO) and HollyFrontier (NYSE:HFC) trade at EV/EBITDA multiples of 5.7 times and 5.5 times, respectively.

However, after factoring in Marathon's higher earnings contribution from its midstream and retail operations, the discount is even more pronounced. In Elliott's estimation, Marathon's refining business only trades at 0.9 times its EV/EBITDA. On the other hand, the market values HollyFrontier's stand-alone refining operations at 4.1 times, while Valero's refining value is 5.1 times. Elliott believes this is because Marathon operates as a conglomerate, which is weighing on its share price and MPLX's units.

Realizing its full potential

In addition to making these moves, Elliott also suggests that Marathon make some operational changes. On the refining side, it can work on initiatives that bring its EBITDA margins and working capital efficiency in line with those of industry leader Valero. Those changes should boost an independent Marathon's enterprise value EV/EBITDA multiple closer to Valero's level.

Meanwhile, an independent Speedway could make moves to close the gap between its merchandise and fuel margins and those of industry leader Couche-Tard. Those moves, likewise, should enable that company to trade at an EV/EBITDA multiple near Couche-Tard's.

Finally, MPLX could convert to a corporation. That should allow it to trade at a higher EV/EBITDA multiple in line with large pipeline corporations like Williams Companies and Kinder Morgan.

In Elliott's estimation, these moves could unlock another $17 billion in value. Add it all up, and Marathon could be worth $115 per share, or more than double its current trading price.

An attractive opportunity

While Marathon Petroleum has created lots of value since its separation from Marathon Oil, it could do even better. Splitting into three independent companies alone could unlock some of the conglomerate discount. Add in some operations changes, and there's even more upside potential.

Moves like these, however, are only some of the catalysts that Wall Street sees ahead for Marathon's stock. That's why nearly all the analysts who cover the company have a buy (or equivalent rating) on the stock. Given all this optimism and upside potential, investors will want to take a closer look at Marathon Petroleum.