Valero Energy Corporation (VLO) Intrinsic Value & DCF Valuation
Oil & Gas Refining & Marketing · NYSE
Current Price
$443.35
Intrinsic Value
$619.55
+28.4% margin of safety
What Is Valero Energy Corporation's Intrinsic Value?
As of 2026-10-08, the base-case DCF model estimates the intrinsic value of Valero Energy Corporation (VLO) at $619.55 per share, compared with a market price of $443.35, a margin of safety of +28.4%. The base case assumes 5.3% annual free cash flow growth and a 10.0% discount rate.
Across the sensitivity grid the estimate spans $542.56 to $710.52. Intrinsic value is an estimate built on assumptions, not a fact. A higher discount rate or slower growth pushes the estimate down, while stronger cash flow growth lifts it.
How the DCF works · Recalculate with your own assumptions · What is intrinsic value?
Is Valero Energy Corporation (VLO) Undervalued?
At $443.35, VLO trades about 28.4% below the base-case intrinsic value estimate. That is a real discount, but it stays short of the 30% margin of safety required before calling a stock undervalued.
COMPETITIVE MOAT
↑Scale and Operational Efficiency
Valero operates a large, integrated network of refineries. This scale allows for cost efficiencies and optimization across its operations, a significant barrier to new entrants.
↑Strategic Asset Locations
Its refineries are strategically located near key demand centers and feedstock sources. This minimizes transportation costs and ensures reliable product delivery.
↑Product Diversification and Logistics
Valero's ability to produce and market a diverse range of refined products, including gasoline, diesel, and jet fuel, provides resilience. Its extensive logistics network further strengthens its market position.
INVESTMENT RISKS
↓Energy Transition and Demand Shifts
The long-term shift towards renewable energy sources poses a secular risk to demand for refined petroleum products. Valero must adapt its business model to this evolving landscape.
↓Geopolitical and Supply Chain Disruptions
Global events can disrupt crude oil supply and refined product demand. Valero's reliance on global energy markets makes it susceptible to these external shocks.
↓Capital Intensity and Environmental Compliance
Operating refineries is capital-intensive and subject to stringent environmental regulations. Significant ongoing investment is required to maintain compliance and operational efficiency.
Base case
VLO base case valuation
Intrinsic Value
$619.55
Margin of safety
+28.4%
Expected annual return
+6.9%
Base case assumptions: 5.3% annual growth, 10.0% discount rate, 12.61x exit multiple, 5 year projection. Data as of 2026-10-08.
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)
$452.14
FCF/Share (TTM)
$34.42
ROIC (TTM)
16.5%
ROE (TTM)
29.9%
P/FCF
12.6x
EV/EBITDA
9.8x
FCF Yield
7.93%
Debt/Equity
0.45x
On a trailing twelve-month basis, VLO generates free cash flow per share of $34.42 alongside a ROIC of 16.5%, both central inputs for a DCF valuation. Its P/FCF ratio of 12.6x and FCF yield of 7.93% then frame how VLO is priced against peers on a cash flow basis.
Frequently Asked Questions
What is the intrinsic value of VLO?
Valero Energy Corporation currently generates $34.42 in free cash flow per share. At the current price of $443.35, 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 12.6x with a free cash flow yield of 7.93%. A low P/FCF means investors are paying less per dollar of free cash flow; whether that is cheap depends on the company's growth, cyclicality, and capital intensity. 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 ($34.42) 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 0.45x, 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 16.5% reflects how efficiently the company converts invested capital into profit.
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 0.45x, the capital structure directly influences WACC. A 1% increase in WACC typically reduces the intrinsic value by 10-15%. At an EV/EBITDA of 9.8x, 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 2026-10-08. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.