Valero Energy (VLO): Exploring Current Valuation with Shares Treading Water

Valero Energy (NYSE:VLO) has quietly slipped onto investor radars again, with its shares drifting lower by about 0.5% after a relatively flat week. While there has been no headline-driving event or breaking news spark, the movement is just enough to make investors pause and ask whether there is something shifting below the surface. Sometimes these subtle changes can end up pointing to larger forces at play, especially when it comes to a major player in the energy sector like Valero. Stepping back, Valero’s journey this year reflects a mix of steady gains and shifting signals. The company’s stock has picked up real momentum, climbing nearly 15% over the past month and more than 20% in the past year. That long-term momentum has been even more pronounced, with returns climbing significantly over three and five years. With annual revenue and net income showing growth, even if revenue itself only edged up, the market’s latest hesitation comes against a backdrop of generally constructive numbers. So, is this a rare moment to buy into Valero at a relative discount, or are investors simply pricing in every ounce of the company’s future growth?

Most Popular Narrative: 1% Undervalued

According to the most widely followed narrative, Valero Energy is trading just below its estimated fair value, offering a potential opening for investors looking for value in the energy sector.

A strong balance sheet and $5.3 billion of available liquidity provide Valero with operational and financial flexibility to invest in growth and optimization projects. This could potentially improve future earnings. The potential for higher D4 RIN prices and an increase in the RIN obligation could positively impact the renewable diesel segment's earnings by improving margins.

Curious what’s driving Valero’s surprising valuation? The most popular narrative hints at ambitious profit targets, shifting market dynamics, and a controversial growth roadmap. Major upgrades, future cash flow, and the sector’s hottest debates are all considered in this number. Want to see what’s behind the analysts’ big call?

Result: Fair Value of $158.33 (ABOUT RIGHT)

Have a read of the narrative in full and understand what's behind the forecasts.

However, risks remain. Asset impairments or ongoing struggles in the renewable segment could quickly undermine these optimistic forecasts.

Find out about the key risks to this Valero Energy narrative.

Another View: SWS DCF Model Says Shares Look Cheap

While traditional valuation looks at earnings compared to industry averages and suggests Valero might be priced steeply, our DCF model tells a different story. This approach points to shares trading below what long-term cash flows could justify. Could the real value be hiding in the numbers others overlook?

Look into how the SWS DCF model arrives at its fair value.

Stay updated when valuation signals shift by adding Valero Energy to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own Valero Energy Narrative

If these views do not match your outlook, or you want to see the numbers for yourself, you can dive in and form your own perspective in just a few minutes. Do it your way

A great starting point for your Valero Energy research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

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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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