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Valero’s Peer Comparisons: Forward Valuations

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Valero’s peer comparison

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

Before we proceed with peer comparisons, let us consider the market capitalizations (or market cap) of American refiners. Valero’s (VLO) market cap stands at ~$31 billion. Its peers Marathon Petroleum (MPC) and Tesoro (TSO) have lower market caps, standing at ~$20 billion and ~$11 billion, respectively. Phillips 66 (PSX) has a market cap of ~$47 billion.

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Valero’s forward valuations

Valero Energy (VLO) is currently trading at a forward PE (price-to-earnings ratio) of 8.9x, below its peer average of 9.9x. Valero’s (VLO) peers Marathon Petroleum (MPC), HollyFrontier (HFC), Northern Tier Energy (NTI), PBF Energy (PBF), and CVR Refining (CVRR) also trade below the average forward PE.

Valero Energy (VLO) is currently trading at a forward EV-to-EBITDA of 4.9x, below its peer average of 5.8x. Most of VLO’s peers are trading closer to the average forward EV-to-EBITDA. However, Tesoro (TSO), Western Refining (WNR), and Phillips 66 (PSX) are trading above the average forward EV-to-EBITDA.

Thus, the valuations reveal that Valero is undervalued compared to its peers.

For exposure to energy sector stocks, you can consider the iShares Core S&P Total US Stock Market ETF (ITOT). ITOT has ~6% exposure to the sector.

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