How Do HFC’s Valuations Compare to Peers?



HFC’s peer comparison

In the earlier part, we discussed HollyFrontier’s (HFC) historical valuation trends. In this part, we will consider HFC’s forward valuations compared to those of its peers.

Before we proceed with the peer comparison, let’s consider the market capitalizations of American refiners. HollyFrontier’s market cap stands at ~$6.3 billion, which is higher than peers Western Refining (WNR) and PBF Energy (PBF), which stand at ~$2.7 billion and ~$3.2 billion, respectively. Bigger companies include Phillips 66 (PSX), Valero (VLO), and Marathon Petroleum (MPC), which have market caps of ~$46 billion, ~$31 billion, and ~$19 billion, respectively.

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HFC’s forward valuations

HollyFrontier (HFC) is currently trading at a forward PE (price-to-earnings) ratio of 9.9x, marginally above its peer average of 9.8x. The PE ratio measures the company’s price per share as a multiple of earnings per share. So, all else being equal, the higher the ratio, the more expensive the stock. HFC’s peers such as WNR, DK, PSX, and Tesoro (TSO) are also trading above the average forward PE.

HollyFrontier (HFC) is currently trading at a forward EV/EBITDA of 5.6x, below its peer average of 5.8x. Most of HFC’s peers are trading closer to the average forward EV/EBITDA. But Phillips 66 (PSX) and Northern Tier Energy (NTI) are trading way above the peer average.

If you are looking for exposure to refining sector stocks, you can consider the iShares North American Natural Resources ETF (IGE). The ETF has ~10% exposure to refining and marketing sector stocks.


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