For most investors, how much a stock's price changes over time is important. Not only can it impact your investment portfolio, but it can also help you compare investment results across sectors and industries.
Another factor that can influence investors is FOMO, or the fear of missing out, especially with tech giants and popular consumer-facing stocks.
What if you'd invested in Valero Energy (VLO) ten years ago? It may not have been easy to hold on to VLO for all that time, but if you did, how much would your investment be worth today?
Valero Energy's Business In-Depth
With that in mind, let's take a look at Valero Energy's main business drivers.
San Antonio, TX-based Valero Energy Corporation is the largest independent refiner and marketer of petroleum products in the United States. The company was founded in 1980. It has a refining capacity of 3.1 million barrels per day across 15 refineries located throughout the United States, Canada and the United Kingdom.
Moreover, Valero is a leading ethanol producer with 14 ethanol plants in the Midwest that have a combined capacity of 1.73 billion gallons per year. The products of the company are sold in the markets of the United States, Canada, the United Kingdom, Ireland and Latin America. The company’s brand names are carried by around 7,000 outlets.
The company organizes its business through three reportable segments, namely, Refining, Ethanol and Renewable Diesel.
Refining: The Refining segment was responsible for 92% of the total margin in 2022. It includes refining operations, wholesale marketing, product supply and distribution, and transportation operations. This segment is segregated geographically into the Gulf Coast, mid-continent, West Coast and Northeast regions.
Ethanol: The Ethanol segment includes sales of internally produced ethanol and distillers grains. Operations of this segment are geographically located in the Central Plains region of the United States. This segment was responsible for 3.6% of the total margin in 2022.
Renewable Diesel: In the first quarter of 2019, the company created this segment. The Renewable Diesel segment incorporates the operations of a consolidated joint venture, Diamond Green Diesel. Notably, the renewable diesel plant is North America’s largest biomass-based diesel plant and it is located in Norco, LA. The segment provided 4.5% of the total margin in 2022, which was supported by the expansion of the Diamond Green Diesel plant.
While anyone can invest, building a lucrative investment portfolio takes research, patience, and a little bit of risk. If you had invested in Valero Energy ten years ago, you're probably feeling pretty good about your investment today.
According to our calculations, a $1000 investment made in September 2013 would be worth $4,167.52, or a gain of 316.75%, as of September 19, 2023, and this return excludes dividends but includes price increases.
In comparison, the S&P 500 gained 158.10% and the price of gold went up 35.89% over the same time frame.
Looking ahead, analysts are expecting more upside for VLO.
Among all the independent refiners, Valero offers the most diversified refinery base with a capacity of 3.2 million barrels per day in its 15 refineries located throughout the United States, Canada and the Caribbean. The majority of Valero’s refining plants are located at the Gulf coast area from where there is easy access to the export facilities. The Gulf coast presence helped it to expand export volumes over the past years and gain from high distillate margins. Notably, Valero intends to quadruple renewable diesel production capacity by 2023. However, the firm’s high debt level can affect its financial flexibility. Also, VLO expects its refining business to remain under pressure. We also expect the adjusted operating income in Valero’s Refining segment to decline significantly this year. As such, the stock warrants a cautious stance.
Shares have gained 11.53% over the past four weeks and there have been 8 higher earnings estimate revisions for fiscal 2023 compared to none lower. The consensus estimate has moved up as well.
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