Valero Energy Corporation (VLO): A Bull Case Theory

We came across a bullish thesis on Valero Energy Corporation  on Stock Analysis Compilation’s Substack. In this article, we will summarize the bulls’ thesis on VLO. Valero Energy Corporation 's share was trading at $136.81 as of August 18^th. VLO’s trailing and forward P/E were 55.17  and 19.27 respectively according to Yahoo Finance.

Valero Energy Corporation (VLO) is a leading independent petroleum refiner and a growing force in renewable fuels, supported by its scale, efficiency, and disciplined capital allocation. At the core of the company is its extensive refining segment, comprising 15 refineries with a throughput capacity of roughly 3.2 million barrels per day, primarily concentrated along the U.S. Gulf Coast. This geographic advantage provides access to diverse crude oil sources, cost-efficient logistics, and robust export markets, enabling Valero to sustain strong cash flow generation across cycles.

Its ability to process a wide range of feedstocks, combined with consistently high utilization rates and a low-cost structure, allows the company to maintain flexibility and preserve margins in volatile energy markets. Beyond refining, Valero has established itself as a leader in renewable diesel through its Diamond Green Diesel joint venture, one of the largest producers globally. This business converts waste feedstocks like used cooking oil and animal fats into low-carbon fuels, providing a natural hedge against regulatory pressures and evolving consumer demand.

The company has also entered Sustainable Aviation Fuel, reinforcing its first-mover advantage in lower-carbon transportation solutions. A defining feature of Valero’s strategy is its disciplined capital allocation, balancing consistent shareholder returns with reinvestment in growth. The company has prioritized dividends and buybacks while channeling growth capital into projects that enhance refining efficiency and expand renewable fuels capacity. This balanced approach not only maximizes near-term shareholder value but also positions Valero for long-term profitability and resilience in the global energy transition.

Previously we covered a bullish thesis on Delek US Holdings by Matt Lindsay in May 2025, which highlighted the Enterprise Optimization Plan, midstream deconsolidation, and shareholder returns as key drivers of long-term value. The company’s stock price has appreciated approximately by 16.37% since our coverage. This is because operational progress offset refining headwinds. The thesis still stands as optimization continues. Stock Analysis Compilation shares a similar view but emphasizes Valero’s scale, efficiency, and renewable fuels leadership.

Valero Energy Corporation  is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 55 hedge fund portfolios held VLO at the end of the first quarter which was 52 in the previous quarter. While we acknowledge the potential of VLO as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None.