Stock Analysis

Will Valero Energy Corporation's (NYSE:VLO) Earnings Grow Over The Next Few Years?

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The latest earnings update Valero Energy Corporation's (NYSE:VLO) released in December 2017 confirmed that the business experienced a strong tailwind, leading to a high double-digit earnings growth of 77.65%. Investors may find it useful to understand how market analysts perceive Valero Energy's earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in. Check out our latest analysis for Valero Energy

Market analysts' consensus outlook for the coming year seems pessimistic, with earnings decreasing by a double-digit -20.53%. In the next couple of years, earnings should continue to be below today's level, with a decline of -16.34% in 2020, eventually reaching US$3.40B in 2021.

NYSE:VLO Future Profit Mar 7th 18
NYSE:VLO Future Profit Mar 7th 18

Although it is useful to understand the growth each year relative to today’s figure, it may be more valuable estimating the rate at which the earnings are growing every year, on average. The advantage of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Valero Energy's earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I've inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is -3.53%. This means, we can expect Valero Energy will chip away at a rate of -3.53% every year for the next few years.

Next Steps:

For Valero Energy, there are three important factors you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is VLO worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether VLO is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of VLO? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

Valuation is complex, but we're helping make it simple.

Find out whether Valero Energy is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.