Valero Energy Corporation Stock Buy Recommendation Reiterated (VLO)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Valero Energy Corporation (NYSE: VLO) has been reiterated by TheStreet Ratings as a buy with a ratings score of A-. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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Highlights from the ratings report include:
  • Powered by its strong earnings growth of 251.28% and other important driving factors, this stock has surged by 86.42% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, VLO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • VALERO ENERGY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, VALERO ENERGY CORP increased its bottom line by earning $3.75 versus $3.67 in the prior year. This year, the market expects an improvement in earnings ($5.34 versus $3.75).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 251.4% when compared to the same quarter one year prior, rising from -$432.00 million to $654.00 million.
  • The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.76 is somewhat weak and could be cause for future problems.

Valero Energy Corporation operates as an independent petroleum refining and marketing company. The company operates through three segments: Refining, Ethanol, and Retail. Valero Energy has a market cap of $22.2 billion and is part of the basic materials sector and energy industry. The company has a P/E ratio of 7.00, below the S&P 500 P/E ratio of 18.00. Shares are up 18% year to date as of the close of trading on Monday.

You can view the full Valero Energy Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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