NEW YORK (TheStreet) -- Yesterday marked the five-year-anniversary of the BP (BP - Get Report) oil spill. The company's stock is still down significantly since then. Other oil companies were hit by the incident, too. Five years later, are there any oil stocks that are a good investment? You bet, particularly in refineries.

With crude prices low, refineries can buy and refine more of it. So, besides the initial hit on inventory from low prices, refineries do better when the cost is low. Also, people tend to buy more gas when oil is low, so there's more demand for the refineries.

What are the best large-cap refining companies investors should be buying? Here are the top three, according to TheStreet Ratings, TheStreet's proprietary ratings tool.

TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Check out which three oil-refining companies made the list. And when you're done be sure to read about which mid-cap energy stocks to add to your portfolio. Year-to-date returns are based on April 20, 2015 closing prices. The highest-rated stock appears last -- read more to see which one is No. 1.

 

VLO ChartVLO data by YCharts
3. Valero Energy Corporation
( VLO - Get Report)
Rating: Buy, A-
Market Cap: $29.6 billion
Year-to-date return: 16.1%

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.

"We rate VALERO ENERGY CORP (VLO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, largely solid financial position with reasonable debt levels by most measures, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 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.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 20.3%. 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.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 10.3% when compared to the same quarter one year ago, dropping from $1,288.00 million to $1,155.00 million.

TSO ChartTSO data by YCharts
2. Tesoro Corporation (TSO)

Rating: Buy, A
Market Cap: $10.4 billion
Year-to-date return: 12.5%

Tesoro Corporation, through its subsidiaries, engages in petroleum refining and marketing activities in the United States. It operates in three segments: Refining, Tesoro Logistics LP (TLLP), and Retail.

"We rate TESORO CORP (TSO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. 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 good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 4566.66% and other important driving factors, this stock has surged by 63.53% 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, TSO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • TESORO 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, TESORO CORP increased its bottom line by earning $6.69 versus $2.83 in the prior year. This year, the market expects an improvement in earnings ($7.78 versus $6.69).
  • 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 2171.4% when compared to the same quarter one year prior, rising from -$7.00 million to $145.00 million.
  • Net operating cash flow has significantly increased by 67.72% to $317.00 million when compared to the same quarter last year. In addition, TESORO CORP has also vastly surpassed the industry average cash flow growth rate of -12.96%.

MPC ChartMPC data by YCharts
1. Marathon Petroleum Corporation (MPC - Get Report)

Rating: Buy, A
Market Cap: $27.1 billion
Year-to-date return: 10%

Marathon Petroleum Corporation, together with its subsidiaries, engages in refining, marketing, retailing, and transporting petroleum products primarily in the United States. It operates through three segments: Refining & Marketing, Speedway, and Pipeline Transportation.

"We rate MARATHON PETROLEUM CORP (MPC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, 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."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
  • MARATHON PETROLEUM CORP has improved earnings per share by 38.2% 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 year. We feel that this trend should continue. During the past fiscal year, MARATHON PETROLEUM CORP increased its bottom line by earning $8.84 versus $6.61 in the prior year. This year, the market expects an improvement in earnings ($9.93 versus $8.84).
  • 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 27.5% when compared to the same quarter one year prior, rising from $626.00 million to $798.00 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that MPC's debt-to-equity ratio is low, the quick ratio, which is currently 0.65, displays a potential problem in covering short-term cash needs.
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