Despite its impressive fundamentals, NYSE:VLO remains undervalued.

Last update: Dec 13, 2023

Our stock screener has spotted VALERO ENERGY CORP (NYSE:VLO) as an undervalued stock with solid fundamentals. NYSE:VLO shows decent health and profitability. At the same time it remains remains attractively priced. We'll dive into each aspect below.

How do we evaluate the Valuation for NYSE:VLO?

An integral part of ChartMill's stock analysis is the Valuation Rating, which spans from 0 to 10. This rating evaluates diverse valuation factors, including price to earnings and cash flows, while considering the stock's profitability and growth. NYSE:VLO has received a 7 out of 10:

With a Price/Earnings ratio of 4.08, the valuation of VLO can be described as very cheap.
84.72% of the companies in the same industry are more expensive than VLO, based on the Price/Earnings ratio.
The average S&P500 Price/Earnings ratio is at 24.87. VLO is valued rather cheaply when compared to this.
Based on the Price/Forward Earnings ratio of 8.08, the valuation of VLO can be described as reasonable.
VLO's Price/Forward Earnings ratio is a bit cheaper when compared to the industry. VLO is cheaper than 64.35% of the companies in the same industry.
When comparing the Price/Forward Earnings ratio of VLO to the average of the S&P500 Index (20.46), we can say VLO is valued rather cheaply.
86.11% of the companies in the same industry are more expensive than VLO, based on the Enterprise Value to EBITDA ratio.
85.65% of the companies in the same industry are more expensive than VLO, based on the Price/Free Cash Flow ratio.
The decent profitability rating of VLO may justify a higher PE ratio.

Understanding NYSE:VLO's Profitability

Discover ChartMill's exclusive Profitability Rating, a proprietary metric that assesses stocks on a scale of 0 to 10. It takes into consideration various profitability ratios and margins, both in absolute terms and relative to industry peers. Notably, NYSE:VLO has achieved a 6:

The Return On Assets of VLO (16.95%) is better than 77.31% of its industry peers.
VLO has a Return On Equity of 41.23%. This is amongst the best in the industry. VLO outperforms 83.80% of its industry peers.
Looking at the Return On Invested Capital, with a value of 25.90%, VLO belongs to the top of the industry, outperforming 87.04% of the companies in the same industry.
In the last couple of years the Profit Margin of VLO has grown nicely.
VLO's Operating Margin has improved in the last couple of years.
In the last couple of years the Gross Margin of VLO has grown nicely.

A Closer Look at Health for NYSE:VLO

A critical element of ChartMill's stock evaluation is the Health Rating, which spans from 0 to 10. This rating considers multiple health factors, including liquidity and solvency, both in absolute terms and relative to industry peers. NYSE:VLO has received a 8 out of 10:

VLO has an Altman-Z score of 4.98. This indicates that VLO is financially healthy and has little risk of bankruptcy at the moment.
The Altman-Z score of VLO (4.98) is better than 89.81% of its industry peers.
The Debt to FCF ratio of VLO is 1.04, which is an excellent value as it means it would take VLO, only 1.04 years of fcf income to pay off all of its debts.
VLO has a Debt to FCF ratio of 1.04. This is amongst the best in the industry. VLO outperforms 81.02% of its industry peers.
VLO has a Debt/Equity ratio of 0.39. This is a healthy value indicating a solid balance between debt and equity.
VLO has a better Current ratio (1.51) than 63.89% of its industry peers.

A Closer Look at Growth for NYSE:VLO

ChartMill assigns a Growth Rating to each stock, ranging from 0 to 10. This rating is determined by analyzing different growth elements, including EPS and revenue growth, spanning both historical and future figures. In the case of NYSE:VLO, the assigned 4 reflects its growth potential:

The Earnings Per Share has grown by an impressive 27.14% over the past year.
VLO shows a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 42.51% yearly.
Measured over the past years, VLO shows a quite strong growth in Revenue. The Revenue has been growing by 13.42% on average per year.

More Decent Value stocks can be found in our Decent Value screener.

For an up to date full fundamental analysis you can check the fundamental report of VLO

Keep in mind

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.