Is Valero Trading Below Its Value After 38.7% Rally in 2025?

• Wondering if Valero Energy is trading at a bargain or if it has already hit its stride? Let’s break down what’s happening and see if the numbers back up your instincts.
• Despite a dip of 2.8% over the past week, the stock powered up 8.3% in the last month and has returned an impressive 38.7% since the start of the year.
• Recent attention has zeroed in on Valero as the company benefitted from favorable fuel margins and continued growth in refining demand. Industry headlines also highlight changing energy policies and shifting global crude dynamics.
• From a valuation standpoint, Valero scores a 2 out of 6 on our simple check, meaning the market sees potential but does not call it cheap just yet. We will dig into several approaches for valuing the company next, and keep reading for a perspective at the end that could shed even more light on whether the stock is a value buy.

Valero Energy scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Valero Energy Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and discounting them back to today. This approach gives investors a sense of what the business is truly worth independent of short-term market movements.

For Valero Energy, analysts report a current Free Cash Flow (FCF) of approximately $4.0 Billion. Projections out to 2029 estimate the company's FCF reaching $4.6 Billion, with values over the next ten years generally remaining within this impressive range. While firm analyst estimates usually only extend five years ahead, longer-term projections are extrapolated using industry-standard assumptions to provide a fuller picture.

According to the DCF model, Valero's fair value is calculated at $321.05 per share. With the current share price trading at a 46.8% discount to this estimated intrinsic value, the analysis indicates a significant undervaluation. This suggests the market may be underestimating Valero's future cash-generating ability, making the stock appear attractive from a cash flow perspective.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Valero Energy is undervalued by 46.8%. Track this in your watchlist or portfolio, or discover 919 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Valero Energy.

Approach 2: Valero Energy Price vs Earnings

The Price-to-Earnings (PE) ratio is widely used to value established, profitable companies like Valero Energy, since it directly ties the market price to the company’s ability to generate earnings. For investors, it serves as a quick gauge of how much you are paying for each dollar of current profits. This makes it especially useful for mature businesses in the oil and gas sector.

Growth expectations and risk play a big role in what constitutes a “fair” PE ratio. Companies with strong growth prospects and lower risk often command higher PE multiples, while those facing challenges or high volatility typically see lower ratios assigned by the market.

Valero Energy is currently trading at a PE ratio of 34.9x. When compared with the Oil and Gas industry average of 13.3x and the peer average of 24.6x, Valero appears more expensive at first glance. However, Simply Wall St’s proprietary Fair Ratio for Valero is 21.9x, reflecting the company’s growth profile, profit margins, size, and sector-specific risks. Unlike industry averages, the Fair Ratio is tailored to Valero’s unique fundamentals, incorporating its future expectations, profitability, and scale.

Since Valero’s actual PE of 34.9x is significantly higher than its Fair Ratio of 21.9x, the stock currently appears overvalued based on this analysis.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Valero Energy Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your story—your perspective and expectations for a company’s future, like Valero Energy, built around your own estimates for revenue, profits, and fair value. Rather than just relying on static ratios, Narratives let you connect the company’s real-world story to its numbers, and then tie those numbers to a dynamic fair value that changes as new news or financial results come in.

Narratives make investment research more personal and intuitive. You can easily create or follow Narratives directly on Simply Wall St’s Community page, where millions of investors collaborate and share their own views. This empowers you to see, at a glance, whether your view of Valero’s fair value is above or below the current market price, helping you decide if it’s time to buy, hold, or reconsider.

Narratives are updated automatically when important events happen, such as earnings, news, or changes in analyst expectations, so your fair value stays current. For Valero Energy, for example, one investor might believe strong refinery margins and disciplined buybacks support a price target as high as $181. Another, concerned about policy changes and renewables pressures, sees fair value closer to $133. Narratives allow you to choose the story and forecast that fits your outlook best, making smarter decisions easier than ever.

Do you think there's more to the story for Valero Energy? Head over to our Community to see what others are saying!

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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