We've been asking ourselves recently if the market has placed a fair valuation on Valero Energy. Let's dive into some of the fundamental values of this Large-Cap Energy company to determine if there might be an opportunity here for value-minded investors.
Valero Energy's Valuation Is in Line With Its Sector Averages:
Valero Energy Corporation manufactures, markets, and sells petroleum-based and low-carbon liquid transportation fuels and petrochemical products in the United States, Canada, the United Kingdom, Ireland, Latin America, Mexico, Peru, and internationally. The company belongs to the Energy sector, which has an average price to earnings (P/E) ratio of 18.35 and an average price to book (P/B) ratio of 1.6. In contrast, Valero Energy has a trailing 12 month P/E ratio of 62.3 and a P/B ratio of 1.99.
Valero Energy has moved 10.5% over the last year compared to 16.2% for the S&P 500 — a difference of -5.7%. Valero Energy has a 52 week high of $159.25 and a 52 week low of $99.0.
EPS Trend Sustained Primarily by Reducing the Number of Shares Outstanding:
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $108,324 | $64,912 | $113,977 | $176,383 | $144,766 | $129,881 |
| Operating Margins | 4% | -2% | 2% | 9% | 8% | 3% |
| Net Margins | 2% | -2% | 1% | 7% | 6% | 2% |
| Net Income (M) | $2,422 | -$1,421 | $930 | $11,528 | $8,835 | $2,770 |
| Net Interest Expense (M) | $454 | $563 | $603 | $562 | $592 | $556 |
| Depreciation & Amort. (M) | $53 | $48 | $47 | $45 | $43 | $1,900 |
| Diluted Shares (M) | 414 | 407 | 407 | 396 | 353 | 322 |
| Earnings Per Share | $5.84 | -$3.5 | $2.27 | $29.04 | $24.92 | $8.58 |
| EPS Growth | n/a | -159.93% | 164.86% | 1179.3% | -14.19% | -65.57% |
| Avg. Price | $70.38 | $50.56 | $66.27 | $98.73 | $130.0 | $154.28 |
| P/E Ratio | 12.05 | -14.45 | 29.19 | 3.4 | 5.21 | 17.98 |
| Free Cash Flow (M) | $5,389 | -$66 | $5,859 | $12,574 | $9,229 | $5,287 |
| EV / EBITDA | 9.38 | -20.94 | 16.91 | 3.0 | 4.57 | 9.81 |
| Total Debt (M) | $9,672 | $14,677 | $13,870 | $11,635 | $11,524 | $8,828 |
| Net Debt / EBITDA | 1.82 | -7.42 | 4.48 | 0.43 | 0.51 | 0.74 |
| Current Ratio | 1.44 | 1.71 | 1.26 | 1.38 | 1.56 | 1.53 |
Valero Energy has growing revenues and increasing reinvestment in the business, a decent current ratio of 1.53, and healthy leverage levels. However, the firm suffers from weak operating margins with a negative growth trend and EPS growth achieved by reducing the number of outstanding shares. Finally, we note that Valero Energy has positive cash flows.
