Valero Energy Rallies 148% in a Year: Time to Buy the Refining Stock?

Valero Energy Corporation VLO has jumped 147.8% over the past year, outperforming the industry’s 118.7% rally. Phillips 66 PSX and Par Pacific Holdings, Inc. PARR, in the same space, have gained 97.8% and 153.5%, respectively, over the period.

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The price chart reflects investors' strong preference for VLO stock. However, before making investment decisions, one should consider the company's overall business environment and fundamentals.

VLO's Advantageous Position in Heavy Crude Aids It

The Iran war shock is driving crude oil prices higher, with West Texas Intermediate (“WTI”) trading above $100 per barrel, according to data from Oilprice.com. The high crude price has significantly increased input costs for refiners such as VLO, PSX and PARR. However, unlike many refiners, Valero Energy has a heavy-crude advantage, as heavy crude is cheaper than light crude like WTI.

Regarding the company’s access to diverse crude feedstocks, Valero has an advantage because its Gulf Coast refineries can buy crude oil from many low-cost sources, including the United States, Canada and Venezuela. This gives the company more flexibility to purchase cheaper oil, which helps keep refining costs low and can boost profits when competitors have fewer sourcing options.

Constrained Global Refining Capacity is a Boon For VLO?

Global refining capacity is constrained and fuel inventories are low. On the demand side, gasoline, diesel and jet fuel remain resilient. This means people are still driving and flying quite often, while diesel demand suggests transportation, freight, agriculture and industrial activity are still holding up. As a result, with busy refineries and fuel not in abundant supply, refining margins for refiners are quite strong.

With crude prices likely to remain high, investors shouldn’t allocate their money only to exploration and production companies but also to refining players like VLO, even though high crude prices have been increasing refiners’ input costs.

Strong Balance Sheet Provides Support for VLO

The leading refining company ended the June quarter of 2026 with a net debt-to-capitalization of just 11%.  It added $2.1 billion to its cash balance during the June quarter, making its financial position even stronger. It also reported $5.3 billion of available liquidity excluding cash, providing significant financial flexibility.

Thus, the company can lean on its balance sheet to combat an uncertain business environment, reflecting its relatively stable business model compared to other players with a weaker balance sheet.

Time to Bet on the Stock?

Valero, with 14 refineries and a combined throughput capacity of roughly 3 million barrels per day, has witnessed upward earnings estimate revisions for 2026 over the past seven days.

Coming to the valuation story, Valero is currently considered expensive on a relative basis, with the stock trading at an 8.20x trailing 12-month Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortization (EV/EBITDA), which is a premium compared with the broader industry average of 5.81x. Two other refiners, Phillips 66 and Par Pacific, are currently trading at 11.55x trailing 12-month EV/EBITDA and 3.54x trailing 12-month EV/EBITDA, respectively.

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Thus, investors are willing to pay a premium price for VLO amid the favorable developments in the company’s business environment, supporting the bullish case for the stock. VLO currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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