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HollyFrontier’s Valuation Dips

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HollyFrontier’s valuation

HollyFrontier’s (HFC) forward PE ratio of 8.0x is below peers’ average of 8.3x. Marathon Petroleum’s (MPC), PBF Energy’s (PBF), and Delek US Holdings’ (DK) ratios are also below average, at 7.5x, 7.6x, and 8.2x, respectively. HollyFrontier’s forward EV-to-EBITDA ratio of 5.2x is also below peers’ average of 5.4x. Valero Energy’s (VLO) and Phillips 66’s (PSX) EV-to-EBITDA ratios are above average, at 5.5x and 6.8x, respectively.

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What HollyFrontier’s valuation suggests

Whereas HollyFrontier’s ratios are below peers’ average, they were higher than peers’ average a couple of quarters back. This quarter, the stock has slumped 18% due to narrower oil spreads dragging down the company’s refining earnings.

Furthermore, weaker base oil cracks could impact HollyFrontier’s Rack Back lubricant earnings. The company has been expanding in the lubricant space for the past few years. These conditions may be driving analysts’ expectations of HFC’s earnings falling 30% this year.

However, the company has strong financials, which could support its expansion spree. HollyFrontier had comfortable debt and decent liquidity in the first quarter.

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