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Are Investors Undervaluing Valero Energy (VLO) Right Now?

Zacks Equity Research

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One stock to keep an eye on is Valero Energy (VLO). VLO is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 10.05. This compares to its industry's average Forward P/E of 14.78. VLO's Forward P/E has been as high as 19.12 and as low as 8.34, with a median of 10.07, all within the past year.

Investors should also note that VLO holds a PEG ratio of 1.26. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. VLO's PEG compares to its industry's average PEG of 1.45. Over the last 12 months, VLO's PEG has been as high as 2.39 and as low as 0.22, with a median of 1.25.

These are only a few of the key metrics included in Valero Energy's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, VLO looks like an impressive value stock at the moment.


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