Viva Energy (ASX:VEA): Valuation Insights Following Third-Quarter Convenience Revenue and Refining Setbacks

Viva Energy Group (ASX:VEA) caught investors’ attention this week after reporting a significant decline in third-quarter convenience revenues. The decline has been linked to falling tobacco sales, new packaging regulations, and higher store-level wage costs.

See our latest analysis for Viva Energy Group.

Viva Energy Group's challenging quarter, marked by lower convenience revenues and a drop in refining intake, has weighed on its momentum with the share price sliding over 14% in the past three months and posting a disappointing year-to-date share price return of -32.65%. While its five-year total shareholder return stands at a positive 28.92%, the one-year total shareholder return has fallen sharply by nearly 29%. This underscores that near-term sentiment has shifted and investors are recalibrating expectations in light of recent headwinds.

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This recent string of setbacks leaves investors questioning whether Viva Energy is trading below its true value or if recent challenges have already been priced into the shares, leaving little room for upside.

Most Popular Narrative: 29.7% Undervalued

With the most popular narrative setting fair value at A$2.57 per share, Viva Energy's last close of A$1.81 stands out as a substantial discount, implying a significant potential upside if the narrative's projections hold up. The narrative centers on operational upgrades and retail conversions as major value drivers in the coming years, foregrounding several specific catalysts for future growth.

"The ramp-up in retail network conversions to OTR branded stores, with demonstrated increases in sales and higher-margin non-fuel offerings, is expected to materially lift revenue and improve overall net margins as consumer demand for convenience retail and fast food continues to rise with ongoing Australian urbanization and busy lifestyles."

Read the complete narrative.

What is the full logic behind this bold fair value? There are critical profit margin moves and ambitious growth assumptions working in the background. Can Viva Energy deliver earnings that match the narrative? The only way to unravel the story is to see all the numbers and scenarios that anchor this valuation.

Result: Fair Value of $2.57 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, policy shifts toward decarbonization and weaker-than-expected retail transition could quickly challenge the bullish assumptions that support Viva Energy's fair value outlook.

Find out about the key risks to this Viva Energy Group narrative.

Build Your Own Viva Energy Group Narrative

If you see the numbers differently or want to draw your own conclusions, you can build a custom narrative and test your insights in just a few minutes. Do it your way

A great starting point for your Viva Energy Group research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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