Valero Energy (VLO): Exploring Current Valuation After Recent Share Price Gains

Valero Energy (VLO) has traded up over the past month, rising more than 8% and outpacing the broader energy sector. Investors are watching how the company’s growth compares to its long-term performance and industry peers.

See our latest analysis for Valero Energy.

Valero Energy’s 38.9% share price return so far this year reflects strong momentum, building off a solid string of quarterly results and renewed optimism around refining margins. Over the past year, the total shareholder return sits at an impressive 33.4%, showing the stock has rewarded investors for staying the course.

If recent gains in the energy space have your attention, this could be the perfect moment to uncover opportunities in See the full list for free.

But with shares sitting just below analyst targets and a healthy run-up already logged, the next question is whether Valero Energy is still undervalued or if future growth is already priced in. This presents a dilemma for potential buyers.

Most Popular Narrative: 2.6% Undervalued

The narrative suggests Valero Energy’s fair value sits just above its last close, reflecting only a slight premium versus current pricing. This signals that analyst models see potential for further upside, but only by a narrow margin.

The SEC unit optimization project at St. Charles, expected to start up in 2026, is projected to increase the yield of high-value products and could potentially boost future revenues and earnings. Anticipated tight product supply and demand balances, with low product inventories, are expected to support refining fundamentals during the driving season and possibly enhance refining margins and revenues.

Read the complete narrative.

What key input is at the heart of this upbeat narrative? Analysts have included a dramatic shift in Valero’s profitability into the equation, helping shape the company’s long-term earnings outlook. The full narrative reveals which numbers could tip the balance and fuel Valero’s next valuation leap.

Result: Fair Value of $175.63 (UNDERVALUED)

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

However, significant asset impairments or ongoing struggles in the renewable diesel segment could quickly challenge this positive outlook for Valero Energy's future performance.

Find out about the key risks to this Valero Energy narrative.

Another View: DCF Model Offers a Different Take

While market multiples suggest Valero Energy trades at a premium to its peers, our DCF model paints a very different picture. It indicates the stock is actually trading significantly below its fair value. With a fair value estimate close to $307.65, could the market be undervaluing Valero's long-term cash flows?

Look into how the SWS DCF model arrives at its fair value.

Build Your Own Valero Energy Narrative

If you have a different perspective or want to dig into the numbers yourself, it takes just a few minutes to craft your own viewpoint. Do it your way

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

Looking for more investment ideas?

Now is the time to get proactive and search for your next opportunity. Don't leave your portfolio on autopilot when new possibilities are just a click away.

• Boost your income potential and explore these 17 dividend stocks with yields > 3% offering robust yields and consistent cash returns for steady growth.
• Spot the innovators shaping the healthcare landscape with these 33 healthcare AI stocks that are merging medicine and artificial intelligence in groundbreaking ways.
• Take advantage of undervalued opportunities by checking out these 877 undervalued stocks based on cash flows with strong cash flows and hidden market value.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com