Reviewing Suncor Energy (SU) & Valero Energy (VLO)

Suncor Energy (NYSE: SU) and Valero Energy (NYSE:VLO) are both large-cap oils/energy companies, but which is the superior stock? We will contrast the two businesses based on the strength of their risk, earnings, valuation, institutional ownership, analyst recommendations, dividends and profitability.

Profitability

This table compares Suncor Energy and Valero Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Suncor Energy 11.63% 5.68% 2.91%
Valero Energy 2.33% 9.87% 4.43%

Analyst Recommendations

This is a summary of current ratings and recommmendations for Suncor Energy and Valero Energy, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Suncor Energy 0 4 10 1 2.80
Valero Energy 0 10 9 0 2.47

Suncor Energy currently has a consensus target price of $43.66, indicating a potential upside of 24.39%. Valero Energy has a consensus target price of $79.06, indicating a potential downside of 6.07%. Given Suncor Energy’s stronger consensus rating and higher possible upside, equities analysts clearly believe Suncor Energy is more favorable than Valero Energy.

Dividends

Suncor Energy pays an annual dividend of $1.01 per share and has a dividend yield of 2.9%. Valero Energy pays an annual dividend of $2.80 per share and has a dividend yield of 3.3%. Suncor Energy pays out 60.8% of its earnings in the form of a dividend. Valero Energy pays out 60.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Valero Energy has raised its dividend for 6 consecutive years. Valero Energy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Suncor Energy has a beta of 0.85, indicating that its share price is 15% less volatile than the S&P 500. Comparatively, Valero Energy has a beta of 1.2, indicating that its share price is 20% more volatile than the S&P 500.

Institutional and Insider Ownership

65.6% of Suncor Energy shares are held by institutional investors. Comparatively, 81.8% of Valero Energy shares are held by institutional investors. 1.0% of Suncor Energy shares are held by company insiders. Comparatively, 0.5% of Valero Energy shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Suncor Energy and Valero Energy’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Suncor Energy $20.20 billion 2.88 $327.75 million $1.66 21.14
Valero Energy $75.66 billion 0.49 $2.29 billion $4.63 18.18

Valero Energy has higher revenue and earnings than Suncor Energy. Valero Energy is trading at a lower price-to-earnings ratio than Suncor Energy, indicating that it is currently the more affordable of the two stocks.

Summary

Valero Energy beats Suncor Energy on 10 of the 18 factors compared between the two stocks.

Suncor Energy Company Profile

Suncor Energy Inc is a Canada-based integrated energy company. The Company is focused on developing Canada’s petroleum resource basin, Athabasca oil sands. The Company operates in three business segments: Oil Sands, Exploration and Production (E&P), and Refining and Marketing. The Company’s Oil Sands segment includes Oil Sands operations and Oil Sands ventures operations. Its E&P segment consists of offshore operations off the east coast of Canada and in the North Sea, and onshore assets in North America, Libya and Syria. The Company’s Refining and Marketing segment is engaged in Refining and Supply, and Marketing operations. In addition, it explores for, acquires, develops, produces and markets crude oil and natural gas in Canada and internationally. It transports and refines crude oil, and markets petroleum and petrochemical products primarily in Canada. It markets third-party petroleum products. The Company also conducts energy trading activities.

Valero Energy Company Profile

Valero Energy Corporation (Valero) is an independent petroleum refiner and ethanol producer. The Company’s segments include refining, ethanol and Valero Energy Partners LP (VLP). The refining segment includes its refining operations and the associated marketing activities. The ethanol segment includes its ethanol operations and the associated marketing activities, and logistics assets that support its ethanol operations. The Company owns logistics assets (crude oil pipelines, refined petroleum product pipelines, terminals, tanks, marine docks, truck rack bays and other assets) that support its refining operations. Some of these assets are owned by VLP, which is a midstream master limited partnership owned by the Company. VLP’s assets include crude oil and refined petroleum products pipeline and terminal systems in the United States Gulf Coast and the United States Mid-Continent regions. Its refineries produce conventional gasolines, premium gasolines and lubricants, among others.

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