Valero Shares Rally Toward 52-Week High: Buy the Strength or Wait?

Core Insights - Valero Energy Corporation (VLO) stock is nearing its 52-week high of $206.77, closing at $196.91 on February 12, with a 50.3% increase compared to a 30.2% gain in the broader sub-industry [1][7] - Valero operates 15 refineries across the U.S., Canada, and Peru, with a combined throughput capacity of 3.2 million barrels per day, setting it apart from other independent refiners [2] - The current softness in crude oil prices is expected to benefit Valero by lowering input costs, as the West Texas Intermediate spot crude price is projected to drop from $65.40 per barrel in 2025 to $53.42 in 2026 [5] - Valero's refineries possess operational flexibility to process various feedstocks, allowing for adjustments in production based on market conditions, which enhances profitability [6] Financial Metrics - Valero's stock trades at a trailing 12-month EV/EBITDA of 7.73X, which is above the industry average of 5.06X [7][10] - Competitors Phillips 66 and HF Sinclair have trailing 12-month EV/EBITDA ratios of 13.03X and 6.82X, respectively [10] Market Position - The company is expected to benefit from strong refining margins due to lower crude prices, enabling it to convert cheaper feedstock into high-value products [9] - Despite the potential for profitability, Valero's current valuation suggests it may be overvalued, prompting a recommendation for investors to wait for a more favorable entry point [12]