So far, we’ve looked at Tesoro Corporation’s (TSO) valuation metrics in isolation over the years. Now, let’s find out where Tesoro stands when compared to its five closest peers in the industry.
At the top for revenue and earnings
In terms of revenue and earnings growth over various time periods, Tesoro stands head and shoulders above its closest peers and the broad market. This clearly explains the company’s recent outperformance.
In terms of profitability overall, Tesoro seems to either match or lag behind its peers. But the company still does stand above its peers in terms of gross margins. Given the nature of its business, which is refining high volumes of crude, it should not be surprising to see its margins at far lower levels compared to those of the broader markets.
In terms of its debt ratios, Tesoro seems to carry slightly higher levels of debt compared to its peers. As we discussed earlier, this is due to its recent acquisitions.
Finally, in terms of valuation, Tesoro clearly stands out from its peers for trading at a premium across various metrics. This reflects the market’s confidence in the stock’s future. But given the nature of Tesoro’s business, which demands high capital costs and delivers low margins, it does trade at a discount to the broader market.
For example, while Tesoro currently trades near ~13x its trailing earnings per share (or EPS), Valero Energy (VLO) trades at barely 6.5x, Marathon Petroleum (MPC) trades at ~10x, and PBF Energy (PBF) trades at ~7x their trailing EPS.
The SPDR S&P 500 ETF Trust (SPY), which mirrors the broader market, currently trades at ~18x its trailing earnings.