Should Investors Bet on Overvalued Par Pacific Stock Right Now?

Par Pacific Holdings Inc PARR is currently considered overvalued, trading at a 4.76x trailing 12-month enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), which is above the broader industry average of 4.47x. PARR’s valuation, however, lags behind that of other refining players such as Valero Energy Corporation VLO and Marathon Petroleum Corp. MPC, which are currently trading at 7.77x and 10.97x, respectively.

Therefore, it likely indicates that investors are willing to pay a premium for the stock, as compared to the industry. But, is the premium justified now? To conclude, we need to analyze Par Pacific’s business fundamentals and current market conditions.

Soft Oil Price to Aid Par Pacific's Refining Business

With West Texas Intermediate (WTI) oil prices currently trading below $60 per barrel, according to data from Oilprice.com, which is significantly lower than a year ago, the overall energy business is now highly uncertain. However, unlike many other energy players, Par Pacific is likely to gain from the current crude pricing environment.

This is because Par Pacific is mainly a refining company with the capacity to process 219,000 barrels of oil daily. As a refining company, PARR is now able to purchase oil at a lower cost, enabling the production of end products, such as gasoline and distillates. Additionally, crude prices are likely to remain soft in the coming days, as the U.S. Energy Information Administration (“EIA”) expects global oil inventories to continue increasing.

EIA projects the spot average West Texas Intermediate price for 2026 at $51.42 per barrel, lower than the estimated $65.32 per barrel in 2025. Thus, like VLO and MPC, Par Pacific, which generates the majority of its gross margin from refining activities, is likely to benefit from soft oil prices.

Par Pacific's Resilient & Competitive Refining Business More

Instead of relying on a single source of crude, PARR has been relying on crude from a variety of sources, comprising U.S. inland oil fields, imported oil delivered by ship, and Canadian heavy crude.

Notably, a significant portion of crude oil sources is waterborne, while 22% consists of Canadian heavy oil. While exposed to multiple sources, Par Pacific has the option to switch if the price of one crude oil type rises.

Additionally, having exposure to Canadian heavy oil, which is cheaper than lighter crude, Par Pacific is likely to have been enjoying a cost advantage. In other words, the refining player has been capable of using lower-priced fuel to produce high-value end products, giving it an edge over other refiners.

Should Investors Bet on the Stock?

The positive developments are reflected in the stock’s price chart. Over the past six months, PARR stock gained 42.2%, outperforming 5.5% growth of the industry’s composite stocks. VLO and MPC also underperformed PARR. While VLO gained 18.5%, MPC jumped 6.7%.

Thus, it seems that PARR, with a successful history of acquisitions with meaningful synergies, is worth the premium valuations. Hence, investors should bet on the stock, which currently carries a Zacks Rank #2 (Buy), right away. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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