NEW YORK ( TheStreet) -- Tesoro ( TSO) is one of the leading independent refiners and a marketer of petroleum products in the Western United States. The company operates through six refineries, with a combined capacity of more than 845,000 barrels per day while its marketing arm includes more than 2,000 retail stations, of which nearly 600 are operated by the company.Tesoro recently reported its quarterly results in which it managed to beat the revenue but missed the earnings estimates. However, despite the mixed results, there are several catalysts at work that could give a boost to the company's shares in the near future. Tesoro is eyeing considerable improvements in its output as well as its margins. With impressive growth prospects, a PEG ratio of just 0.45, which is the lowest in the industry, and a price-to-sales ratio of just 0.2, the company looks seriously undervalued. Therefore, I believe that Tesoro could be a healthy addition to your portfolio. In its quarterly results announced earlier this month, Tesoro reported a 77.4% year-over-year drop in adjusted earnings to 44 cents per share, missing analysts' estimates by 5 cents per share. The massive decline was due to the 43% increase in operating expenses and a significant reduction in refining margins. However, Tesoro's throughput increased by an impressive 57% year-over-year to 863,000 barrels per day. Earlier in June, Tesoro acquired BP's ( BP) Carson refinery and other related assets for $2.33 billion, including more than $1 billion of inventory. This acquisition has given a boost to the company's output from its Los Angeles operations, which now includes the Wilmington and the newly purchased Carson refineries. With the exception of its Mid-Continent business, where its output fell 2%, Tesoro's refineries in all other regions reported an increase in throughput. Meanwhile, Tesoro's retail segment delivered a better performance with 124% increase in fuel sales (also a result of the acquisition) and a 6% increase in merchandise sales from the same quarter last year. With this output increase and a better performance from retail segment, Tesoro ended the quarter with a solid 42% year-over-year increase in revenues to $11.24 billion, zooming past the market's consensus estimate of $9.45 billion. Tesoro is a company in transition towards becoming a bigger, more efficient organization. For a refiner, this would translate into three primary objectives; an increase in output, better utilization and improvement in margins. Based on the results discussed earlier, Tesoro has clearly delivered a strong performance in terms of output and utilization. This was the first of the two big positives from its earnings release. On the other hand, the weakness in refining margins has led to the significant drop in earnings. So what is Tesoro's plan for the future? It has increased its capacity after the massive acquisition, but how is it going to improve its margins? This brings us to the second of the two big positives: Tesoro looks poised to significantly increase its earnings in the coming years.