Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Valero Energy ( VLO) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Valero Energy as such a stock due to the following factors:

  • VLO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $463.8 million.
  • VLO has traded 1.3 million shares today.
  • VLO is trading at 2.18 times the normal volume for the stock at this time of day.
  • VLO is trading at a new high 3.01% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on VLO:

Valero Energy Corporation operates as an independent petroleum refining and marketing company in the United States, Canada, the Caribbean, the United Kingdom, and Ireland. It operates through two segments, Refining and Ethanol. The stock currently has a dividend yield of 2.6%. VLO has a PE ratio of 9.0. Currently there are 10 analysts that rate Valero Energy a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Valero Energy has been 8.1 million shares per day over the past 30 days. Valero Energy has a market cap of $32.1 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.88 and a short float of 3.5% with 2.27 days to cover. Shares are up 25.4% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Valero Energy as a buy. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The current debt-to-equity ratio, 0.31, 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 0.97 is somewhat weak and could be cause for future problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, VALERO ENERGY CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 19.6%. Since the same quarter one year prior, revenues fell by 19.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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