Credit: Shutterstock photoValue investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn't want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let's put Valero Energy Corporation VLO stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock's current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Valero Energy has a trailing twelve months PE ratio of 13.99, as you can see in the chart below:
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock's price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Valero Energy has a P/S ratio of about 0.40. This is considerably lower than the S&P 500 average, which comes in at 2.98 right now.
Broad Value Outlook
In aggregate, Valero Energy currently has a Zacks Value Style Score of 'A', putting it into the top 20% of all stocks we cover from this look. This makes Valero Energy a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) for Valero Energy comes in at 5.74, which is far better than the industry average of 7.36. Clearly, VLO is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Valero Energy might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of 'C' and a Momentum score of 'B'. This gives VLO a Zacks VGM score-or its overarching fundamental grade-of 'A'. (You can read more about the Zacks Style Scores here >> )
Meanwhile, the company's recent earnings estimates have been mixed at best. The current quarter has seen two estimates go lower in the past sixty days compared to none higher, while the full year estimate has seen five up and three down in the same time period.
This has had a small impact on the consensus estimate though as the current quarter consensus estimate has risen by 2.9% in the past two months, while the full year estimate has dropped by 3.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Valero Energy Corporation Price and Consensus
Valero Energy Corporation Price and Consensus | Valero Energy Corporation Quote
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Valero Energy is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (among the Bottom 38%) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks categorized Oil Refining & Marketing industry has clearly underperformed the broader market, as you can see below:
Zacks' Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Valero Energy Corporation (VLO): Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
