Is Valero Energy (VLO) Expensive As Record Profit Lifts Expectations?
Valero Energy (VLO) is back in focus after reporting record second quarter profit, with refining operating income more than tripling and its renewable diesel segment moving into profit as global fuel supply remains tight.
See our latest analysis for Valero Energy.
These record results come after a powerful run in Valero Energy’s share price, with a 90 day share price return of 43.62% and year to date share price return of 109.46%, while the 5 year total shareholder return is above 5x.
If record refining profits have you looking beyond Valero Energy, this could be a useful moment to scan for other opportunities in power and fuel infrastructure through the 39 power grid technology and infrastructure stocks
After a record quarter and a share price that has more than doubled this year, investors in Valero Energy now face a simple fork in the road. Is most of the easy upside already behind the stock, or does current valuation still leave meaningful room ahead?
Most Popular Narrative: 29% Overvalued
At a last close of $346.26 compared with a narrative fair value of $267.83, the most followed view sees Valero Energy trading well ahead of its calculated worth, with that gap hinging on a detailed set of earnings and margin assumptions.
The analysts have a consensus price target of $267.83 for Valero Energy based on their expectations of its future earnings growth, profit margins and other risk factors.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $312.0, and the most bearish reporting a price target of just $190.0.
Want to see what sits behind that gap between fair value and today’s price? The narrative leans heavily on changing margins, shifting revenue expectations and a tighter share count. Curious which of those variables does the real heavy lifting in this model?
Result: Fair Value of $267.83 (OVERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, you still need to weigh risks for Valero Energy, including potential asset impairments on West Coast operations and pressure on renewable diesel margins from changing policy and market conditions.
Find out about the key risks to this Valero Energy narrative.
Next Steps
With sentiment on Valero Energy clearly mixed, this is a good time to look through the numbers yourself and decide what matters most to you. To see the balance of concerns and potential upsides in one place, review the 3 key rewards and 2 important warning signs
Looking for more investment ideas beyond Valero Energy?
Do not stop with Valero Energy. Use this momentum to broaden your watchlist so you are not relying on a single stock for future opportunities.
- Target reliable cash generators by scanning companies with consistent payouts and stronger balance sheets through the 12 dividend fortresses.
- Hunt for quality at a reasonable price by checking stocks that combine solid fundamentals with appealing valuations using the 53 high quality undervalued stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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