• If you are trying to figure out whether Valero Energy is attractively priced or already reflecting high expectations, starting with a clear view of the current valuation can help frame your next move.
• After a strong run with a 122.1% return over the last year and a 291.6% return over 5 years, the stock has recently been more mixed, with a 3.4% return over 30 days, a 44.5% return year to date, and a 2.2% decline over the last week.
• Recent coverage has focused on Valero Energy's position in the US energy sector, capital allocation decisions, and how its refining exposure fits into broader market sentiment. This helps explain why the share price has moved so sharply over the past year and has kept attention on whether the current price still reflects a reasonable assessment of the business.
• Valero Energy currently has a valuation score of 2 out of 6. The next sections will walk through standard valuation tools such as multiples and discounted cash flow, then finish with a more rounded way to think about what the stock might be worth.

Valero Energy scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Valero Energy Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company might be worth by projecting its future cash flows and then discounting those cash flows back to today using a required rate of return.

For Valero Energy, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month free cash flow is about $5.03b. Analyst estimates and subsequent extrapolations suggest annual free cash flows in the range of roughly $6.56b in 2026, moving to around $5.01b by 2035, with $4.53b projected for 2030. Simply Wall St extrapolates beyond the analyst horizon to complete the 10 year path.

When all of those projected cash flows are discounted back to today, the model arrives at an estimated intrinsic value of $368.98 per share. Compared with the current share price, this implies a 35.3% discount. This indicates that Valero Energy is trading below this DCF estimate of fair value.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Valero Energy is undervalued by 35.3%. Track this in your watchlist or portfolio, or discover 58 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Valero Energy.

Approach 2: Valero Energy Price vs Earnings

For a profitable company like Valero Energy, the P/E ratio is a useful way to see how much investors are currently paying for each dollar of earnings. Higher growth expectations and lower perceived risk usually support a higher P/E, while slower growth or higher risk tend to align with a lower, more cautious multiple.

Valero Energy currently trades on a P/E of 30.50x. That sits above the Oil and Gas industry average of 15.07x and also above the peer average of 19.32x, suggesting the market is assigning a richer earnings multiple than many sector peers.

Simply Wall St’s Fair Ratio for Valero Energy is 23.76x. This is a proprietary estimate of what a reasonable P/E might be, based on factors such as earnings growth characteristics, profit margins, industry, market cap and key risks. Because it is tailored to the company’s own profile, this Fair Ratio offers a more specific yardstick than a broad comparison with peers or a simple industry average.

Comparing the current P/E of 30.50x with the Fair Ratio of 23.76x points to the shares trading above this Fair Ratio estimate.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Valero Energy Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you attach a clear story about Valero Energy to the numbers by linking your view on future revenue, earnings and margins to a financial forecast, an estimated fair value and then a simple comparison of that fair value to today’s price. Multiple Narratives are already live on the Community page, such as one that leans toward a higher fair value of about US$265.11 per share and another that anchors closer to US$170.00. All of these update automatically when new news or earnings are added, so you can see how different perspectives translate into different potential buy or sell decisions for you to consider.

For Valero Energy however, we will make it really easy for you with previews of two leading Valero Energy Narratives:

🐂 Valero Energy Bull Case

Fair value in this bullish narrative: US$265.11 per share.

At the last close of US$238.82, this view implies the stock is about 9.9% below that fair value.

Implied revenue growth used in the forecasts: 15.6%.

• Assumes record refining throughput, higher value product yields and heavier crude optionality support stronger margins and earnings capacity over time.
• Builds in a move from a 2.0% profit margin to around 6.0%, with earnings of about US$7.0b by 2029 and a future P/E of 12.1x.
• Anchors on a bullish analyst price target of US$265.11, while flagging key risks around utilization, heavy crude supply, renewable diesel policy and high payout ratios.

🐻 Valero Energy Bear Case

Fair value in this more cautious narrative: US$218.39 per share.

At the last close of US$238.82, this view implies the stock is about 8.5% above that fair value.

Implied revenue growth used in the forecasts: 3.3%.

• Assumes revenue stays fairly flat with profit margins rising only to about 3.7%, and earnings of roughly US$4.3b by 2029 at a future P/E of 16.1x.
• Highlights that recent share price strength already bakes in high expectations, even though analysts still factor in some operational improvement.
• Flags risks around asset impairments, renewable diesel losses, West Coast refinery closures, policy uncertainty and higher operating costs that could pressure profitability.

If you want to see how these stories play out in full with live numbers and fair value ranges, head straight to the Valero Energy Community Narratives, where you can compare the bull, bear and consensus views side by side, then stress test them against your own assumptions.To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Valero Energy on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

Do you think there's more to the story for Valero Energy? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Disclaimer:This article represents the opinion of the author only. It does not represent the opinion of Webull, nor should it be viewed as an indication that Webull either agrees with or confirms the truthfulness or accuracy of the information. It should not be considered as investment advice from Webull or anyone else, nor should it be used as the basis of any investment decision.