VLO: low PEG, low PE

from 10K statement:

2014 Earning: 6.85
2013 Earning: 4.97

Earning Grow rate: (6.85 - 4.97) ? 4.97 = 37%

PE: today price 58 / 6.85 = 8.46

1yrPEG 8.46 / 37 = 0.22

(Yahoo Finance 5yr PEG is 0.6)



I agree that this is an interesting stock. If you go to this page, you can plot revenue, earnings, and etc very conveniently: http://www.gurufocus.com/financials/VLO

By playing around with the graph, you’ll be able to see pretty quickly that VLO has had a rough couple of years (2010-2011) and is now returning to its 2008 levels of revenue, ebitda, etc. So, the high growth comes from that return, and I assume the low valuation comes from fears that the bad times might come back. Also, notice growth in total revenue is negative for the last 12 months.

Or it could be something else entirely. You’d want to read the annual reports from 2009 to the present to figure out what was going on and why the financials look they way they do. Also, you’d want to learn something about the refining business. Somehow, the ratio between the prices of refined products and the price of crude oil is the key profit driver, I guess. But what determines that ratio and how does it vary with business cycles, the price of oil, and etc? I don’t know. But you would want to know something about that before investing, I would think.

A possible comparison industry is airlines. Those stocks look pretty good right now. But that’s because oil prices have cratered, the economy is picking up, and the industry has shaken out enough that it’s possible to be profitable. The low PE’s in that industry will go away the next time they all start losing money. Which might be soon or in a few years. Cyclical industries are like this. The firms look great at the top of the cycle and then fall apart.

One thing to do is go over to seeking alpha and see if any of their writers follow the stock. The quality of the analysis there is uneven, but some of it is very good.