Valero Energy -- The Essentials

Now trading at a price of $133.95, Valero Energy has moved 2.0% so far today.

Valero Energy returned gains of 22.0% last year, with its stock price reaching a high of $150.39 and a low of $97.73. Over the same period, the stock outperformed the S&P 500 index by 15.0%. More recently, the company's 50-day average price was $116.92. Valero Energy Corporation manufactures, markets, and sells transportation fuels and petrochemical products in the United States, Canada, the United Kingdom, Ireland, Latin America, and internationally. Based in San Antonio, TX, the large-cap Energy company has 9,716 full time employees. Valero Energy has offered a 3.0% dividend yield over the last 12 months.

The Business Has Weak Operating Margins:

2020-02-26 2021-02-23 2022-02-22 2023-02-23
Revenue (MM) $108,324 $64,912 $113,977 $176,383
Gross Margins 4.4% -1.1% 2.8% 9.5%
Operating Margins 3.5% -2.4% 1.9% 8.9%
Net Margins 2.24% -2.19% 0.82% 6.54%
Net Income (MM) $2,422 -$1,421 $930 $11,528
Net Interest Expense (MM) -$454 -$563 -$603 -$562
Depreciation & Amort. (MM) -$2,255 -$2,351 -$2,405 -$2,473
Earnings Per Share $5.85 -$3.49 $2.28 $35.12
EPS Growth n/a -159.66% 165.33% 1440.35%
Diluted Shares (MM) 414 407 408 362
Free Cash Flow (MM) $7,158 $1,962 $6,102 $13,330
Capital Expenditures (MM) -$1,627 -$1,014 -$243 -$756
Net Current Assets (MM) -$12,359 -$16,288 -$16,906 -$11,381
Current Ratio 1.44 1.71 1.26 1.38
Long Term Debt (MM) $9,178 $13,954 $12,606 $10,526
Net Debt / EBITDA 1.6 4.74 2.65 0.61

Valero Energy has exceptional EPS growth and low leverage. Additionally, the company's financial statements display growing revenues and decreasing reinvestment in the business and generally positive cash flows. However, the firm suffers from slimmer gross margins than its peers and weak operating margins with a positive growth rate. Finally, we note that Valero Energy has just enough current assets to cover current liabilities.

Valero Energy Shares Are Inexpensive:

Valero Energy has a trailing twelve month P/E ratio of 3.3, compared to an average of 7.54 for the Energy sector. Based on its EPS guidance of $13.37, the company has a forward P/E ratio of 8.7. According to the 18.0% compound average growth rate of Valero Energy's historical and projected earnings per share, the company's PEG ratio is 0.19. Taking the weighted average of the company's EPS CAGR and the broader market's 5-year projected EPS growth rate, we obtain a normalized growth rate of 10.0%. On this basis, the company's PEG ratio is 0.33. This suggests that its shares are undervalued. The market is placing a fair value on Valero Energy's equity, since its P/B ratio of 1.83 is comparable to its sector average of 1.68. The company's shares are currently trading 4.7% below their Graham number.

Valero Energy Has an Analyst Consensus of Some Upside Potential:

The 17 analysts following Valero Energy have set target prices ranging from $130.0 to $160.0 per share, for an average of $145.82 with a buy rating. As of April 2023, the company is trading -19.8% away from its average target price, indicating that there is an analyst consensus of some upside potential.

Valero Energy has an average amount of shares sold short because 3.1% of the company's shares are sold short. Institutions own 81.1% of the company's shares, and the insider ownership rate stands at 0.56%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 10% stake in the company is worth $4,745,654,834.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.