Market Inference Overview -- VLO Stock

Valero Energy logged a 0.1% change during today's evening session, and is now trading at a price of $126.46 per share.

Over the last year, Valero Energy logged a 5.0% change, with its stock price reaching a high of $152.2 and a low of $104.18. Over the same period, the stock underperformed the S&P 500 index by -10.0%. As of April 2023, the company's 50-day average price was $128.96. 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 3.2% dividend yield over the last 12 months.

Exceptional EPS Growth at the Expense of a Highly Leveraged Balance Sheet:

2018 2019 2020 2021 2022 2023
Revenue (MM) $117,033 $108,324 $64,912 $113,977 $176,383 $151,098
Revenue Growth n/a -7.44% -40.08% 75.59% 54.75% -14.34%
Gross Margins 5% 4% -1% 3% 10% 10%
Operating Margins 4% 4% -2% 2% 9% 10%
Net Margins 3% 3% 0% 1% 7% 7%
Net Income (MM) $3,353 $2,784 $314 $1,288 $11,879 $11,163
Net Interest Expense (MM) $470 $454 $563 $603 $562 $580
Depreciation & Amort. (MM) $2,017 $2,255 $2,351 $2,405 $2,473 $2,644
Earnings Per Share $7.29 $5.84 -$3.5 $2.27 $29.04 $29.25
EPS Growth n/a -19.89% -159.93% 164.86% 1179.3% 0.72%
Diluted Shares (MM) 428 414 407 407 396 270
Free Cash Flow (MM) $3,018 $4,616 $948 $5,859 $12,574 $12,086
Current Ratio 1.65 1.44 1.71 1.26 1.38 1.51
Long Term Debt (MM) $8,871 $9,178 $13,954 $12,606 $10,526 $10,107
Net Debt / EBITDA 1.0 1.16 15.26 2.15 0.37 0.33

Valero Energy has slimmer gross margins than its peers, weak operating margins with a positive growth rate, and a highly leveraged balance sheet. On the other hand, the company benefits from growing revenues and no capital expenditures and exceptional EPS growth. Furthermore, Valero Energy has irregular cash flows.

Valero Energy Is Fairly Valued:

Valero Energy has a trailing twelve month P/E ratio of 4.4, compared to an average of 8.53 for the Energy sector. Based on its EPS guidance of $14.81, the company has a forward P/E ratio of 8.7. The company doesn't provide forward earnings guidance, and the compound average growth rate of its last 6 years of reported EPS is 26.1%. On this basis, Valero Energy's PEG ratio is 0.17. Using instead the 10.6% weighted average of Valero Energy's earnings CAGR and the broader market's anticipated 5-year EPS growth rate, the company's PEG ratio is 0.41, which implies that its shares may be underpriced. Additionally, the market is possibly undervaluing Valero Energy in terms of its equity because its P/B ratio is 1.66 whereas the sector average is 1.78. The company's shares are currently trading -49.8% below their Graham number.

Valero Energy Has an Average Rating of Buy:

The 16 analysts following Valero Energy have set target prices ranging from $130.0 to $171.0 per share, for an average of $151.63 with a buy rating. As of April 2023, the company is trading -15.0% 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 3.7% 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 $4,193,210,601.

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.