Why You Need To Buy Valero Energy

As Valero Energy (VLO) has posted earnings per share of $1.91 - beating the street estimates by $0.18 - we reiterate our bullish stance on the stock. VLO is mainly attractive to investors because of its cheap valuations. It is currently trading at a forward price to earnings of 6x - at a significant discount when compared to industry average of 7.2x. Its dividend yield is 2.4 percent, which is greater than its peers' average of 1.9 percent. In our opinion, Valero's St. Charles and Port Arthur hydrocracker projects are expected to be completed sometime next year, enabling the company to bring enhancement in its profitability situation.

The stock is currently trading at EV/EBITDA of 3.9x, at a considerable discount when compared to Tesoro Corporation's and Chevron Corporation's EV/EBITDA of 3.7x and 4x respectively. It is trading at a premium when compared to Chevron Corporation's EV/EBITDA of 4.06x. VLO is trading at P/S of 0.12x, forward P/E of 6x and EV/Revenue of 0.16x, which are relatively lower than its competitors, as shown in the table below. Find more about this.