Valero Energy Corporation (VLO) Stock Valuation — DCF Analysis
Oil & Gas Refining & Marketing · NYSE
Current Price
$258.67
Intrinsic Value
Outside reliable range
COMPETITIVE MOAT
↑Refining Margin Strength
Tight global refining capacity and low fuel inventories allow Valero to maintain strong refining margins, even with elevated crude oil prices. This pricing power is a key advantage.
↑Renewable Fuels Expansion
Valero's strategic investment in renewable diesel, SAF, and ethanol positions it to capitalize on growing demand for cleaner transportation fuels. This diversification offers future cash flow potential.
↑Operational Scale and Efficiency
As a large-scale refiner, Valero benefits from economies of scale and operational efficiencies. This allows for cost advantages and consistent production.
INVESTMENT RISKS
↓Geopolitical Volatility
Fragile ceasefires and geopolitical tensions, like the Iran situation, can lead to volatile oil prices. This volatility can impact input costs and refining margins unpredictably.
↓Regulatory and Environmental Shifts
Increasingly stringent environmental regulations and a push towards electrification could impact long-term demand for traditional refined products. Valero must adapt to these evolving policies.
↓Competition and Capacity Additions
While current capacity is tight, future additions by competitors could pressure refining margins. Valero faces ongoing competition in a cyclical industry.
Base case
VLO base case valuation
Base case assumptions: 20.0% annual growth, 10.0% discount rate, 13x exit multiple, 5 year projection. Data as of 2026-06-12.
This base case uses default assumptions and is not financial advice. The intrinsic value changes significantly when the growth rate or discount rate changes. Open the calculator to set your own assumptions and see the full sensitivity range.
Customize the VLO valuation
Adjust the growth rate, discount rate, and exit multiple to see how the intrinsic value and margin of safety for Valero Energy Corporation respond.
Open DCF Calculator for VLOCompany Overview
Valero Energy Corporation functions as a global producer and marketer of transportation fuels and petrochemicals, with operations spanning the United States, Canada, the United Kingdom, Ireland, and other international territories. The company organizes its business across three primary divisions: Refining, Renewable Diesel, and Ethanol. Its Refining segment generates a wide array of products, including various types of gasoline (conventional, premium, reformulated, and California Air Resources Board-compliant), diverse diesel fuels (low-sulfur, ultra-low-sulfur, and CARB diesel), jet fuels, blendstocks, asphalts, petrochemicals, and lubricants. This division also handles the sale of lube oils and natural gas liquids. As of the end of 2021, Valero managed 15 petroleum refineries, boasting a combined daily processing capacity of approximately 3.2 million barrels of crude oil. The Ethanol division comprises 12 plants, capable of producing around 1.6 billion gallons of ethanol annually. These facilities also yield co-products such as dry distiller grains, syrup, and inedible corn oil, which are largely supplied to animal feed markets. Valero distributes its refined goods through wholesale rack and bulk channels, in addition to approximately 7,000 branded retail stations operating under names like Valero, Beacon, Diamond Shamrock, Shamrock, Ultramar, and Texaco. Furthermore, Valero contributes to renewable energy production by owning and operating a facility dedicated to converting animal fats, used cooking oils, and inedible distillers corn oils into renewable diesel. Supporting its extensive operations, the company maintains a comprehensive logistics network that includes crude oil and refined product pipelines, storage terminals, tanks, marine docks, and truck rack bays. Originally established in 1980 as Valero Refining and Marketing Company, the firm adopted its current name, Valero Energy Corporation, in August 1997. Its corporate headquarters are situated in San Antonio, Texas.
Financial Metrics — VLO Stock Valuation Data
Revenue/Share (TTM)
$423.38
FCF/Share (TTM)
$19.89
ROIC (TTM)
9.5%
ROE (TTM)
17.6%
P/FCF
13.0x
EV/EBITDA
9.1x
FCF Yield
7.72%
Debt/Equity
0.48x
Based on trailing twelve-month data, VLO shows a free cash flow per share of $19.89 and a ROIC of 9.5%, key inputs for stock valuation using the DCF method. The P/FCF ratio of 13.0x and FCF yield of 7.72% are important context metrics when evaluating VLO's stock valuation relative to peers.
Frequently Asked Questions
What is the intrinsic value of VLO?
Valero Energy Corporation currently generates $19.89 in free cash flow per share. At the current price of $258.67, a DCF model would discount these cash flows at an appropriate WACC and apply a terminal growth rate to arrive at an intrinsic value. The result depends heavily on your growth and discount rate assumptions — a 1% change in WACC typically shifts the fair value estimate by 10-15%. In MiniValuator the model uses a single discount rate that you can edit directly, 10% by default, rather than a computed WACC.
Is VLO undervalued?
VLO trades at a P/FCF ratio of 13.0x with a free cash flow yield of 7.72%. This relatively low P/FCF may suggest the stock is attractively priced relative to its cash generation. However, whether VLO is truly undervalued requires comparing the DCF intrinsic value to the current market price and evaluating whether the margin of safety is sufficient for your risk tolerance.
How do I value VLO stock using DCF?
To perform a DCF valuation on Valero Energy Corporation: (1) Start with the trailing free cash flow per share ($19.89) as the base, (2) project future FCF growth over 5-10 years based on Oil & Gas Refining & Marketing industry trends and company fundamentals, (3) apply a discount rate (WACC) reflecting VLO's risk profile — with a debt-to-equity of 0.48x, capital structure is an important factor, and (4) add a terminal value for cash flows beyond the projection period.
What is DCF valuation and how does it apply to VLO?
DCF (Discounted Cash Flow) estimates what a company is worth today based on its future cash generation. For Valero Energy Corporation, this means projecting how much free cash flow the company will produce over the next 5-10 years, shaped by Oil & Gas Refining & Marketing trends, then discounting those amounts to today's dollars. VLO's ROIC of 9.5% shows moderate capital returns.
How does WACC affect VLO stock valuation?
WACC (Weighted Average Cost of Capital) is the discount rate in a DCF model — it reflects the minimum return investors require. For VLO, with a debt-to-equity ratio of 0.48x, the capital structure directly influences WACC. A 1% increase in WACC typically reduces the intrinsic value by 10-15%. At an EV/EBITDA of 9.1x, the market's implied discount rate can be reverse-engineered for comparison. In MiniValuator you set this discount rate yourself as a single editable number, 10% by default, instead of computing a formal WACC.
Learn More
- See VLO PE Valuation → — Earnings-based stock valuation using PE ratio analysis
- DCF Methodology — Step-by-step guide to discounted cash flow analysis
- PE Methodology — Guide to PE ratio stock valuation
- WACC — Understanding the discount rate used in DCF
- Margin of Safety — How to evaluate downside protection
- Intrinsic Value — How to evaluate stock fair value
- How to Calculate Intrinsic Value — Complete guide for investors
Related Valuations
All Energy valuationsDCF and P/E value VLO with different methods and assumptions, so the two conclusions can differ. Compare the P/E fair value.
Price as of 2026-06-12. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.