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Valero Energy Corporation (NYSE:VLO): Is It A Smart Long Term Opportunity?

Simply Wall St

As Valero Energy Corporation (NYSE:VLO) announced its earnings release on 30 June 2019, it seems that analyst forecasts are fairly optimistic, with earnings expected to grow by 14% in the upcoming year compared with the past 5-year average growth rate of -3.7%. With trailing-twelve-month net income at current levels of US$3.1b, we should see this rise to US$3.6b in 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

View our latest analysis for Valero Energy

Can we expect Valero Energy to keep growing?

The view from 14 analysts over the next three years is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of VLO's earnings growth over these next few years.

NYSE:VLO Past and Future Earnings, August 16th 2019

From the current net income level of US$3.1b and the final forecast of US$3.3b by 2022, the annual rate of growth for VLO’s earnings is 6.5%. This leads to an EPS of $7.64 in the final year of projections relative to the current EPS of $7.31. Margins are currently sitting at 2.8%, which is expected to expand to 3.1% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Valero Energy, I've put together three fundamental aspects you should look at:

  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 Valero Energy 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 Valero Energy is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Valero Energy? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.