- Valero (VLO) is conservatively valued on an absolute basis according to a Discounted Cash Flow Analysis.
- VLO is conservatively valued on a relative valuation basis against its peers group.
- Conservative valuation reflects expected margin contraction. Even though analysts’ 2015 earnings estimates are still biased high, ample margin of safety makes VLO a long-term HOLD.
- If/when estimates do come down, VLO is a BUY on the dip.
- Although good things are more likely to happen to conservatively valued stocks, a separate thesis is needed to indicate how management would unlock value.