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

Profitability

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

Net Margins Return on Equity Return on Assets
Valero Energy 2.33% 9.87% 4.43%
Cosan 1.65% 0.72% 0.22%

Risk & Volatility

Valero Energy has a beta of 1.2, indicating that its stock price is 20% more volatile than the S&P 500. Comparatively, Cosan has a beta of 2.36, indicating that its stock price is 136% more volatile than the S&P 500.

Insider and Institutional Ownership

81.8% of Valero Energy shares are owned by institutional investors. Comparatively, 41.9% of Cosan shares are owned by institutional investors. 0.5% of Valero Energy shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings for Valero Energy and Cosan, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Valero Energy 0 10 9 0 2.47
Cosan 0 1 1 0 2.50

Valero Energy currently has a consensus price target of $79.06, suggesting a potential downside of 9.62%. Given Valero Energy’s higher possible upside, equities research analysts clearly believe Valero Energy is more favorable than Cosan.

Earnings and Valuation

This table compares Valero Energy and Cosan’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Valero Energy $75.66 billion 0.51 $2.29 billion $4.63 18.89
Cosan $3.59 billion 0.45 $79.64 million $0.30 31.53

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

Dividends

Valero Energy pays an annual dividend of $2.80 per share and has a dividend yield of 3.2%. Cosan pays an annual dividend of $0.08 per share and has a dividend yield of 0.8%. Valero Energy pays out 60.5% of its earnings in the form of a dividend. Cosan pays out 26.7% 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 increased 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.

Summary

Valero Energy beats Cosan on 14 of the 17 factors compared between the two stocks.

About Valero Energy

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.

About Cosan

Cosan Limited (Cosan) is a holding company. The Company’s segments include Raizen Energia, Raizen Combustiveis, COMGAS, Cosan Logistica, Lubricants and Other business. The Company’s other business include other investments, in addition to the corporate activities. The Company offers Logistics services, including transportation, port loading and storage of sugar, leasing or lending of locomotives, wagons and other railway equipment, through its subsidiaries Rumo Logistica Operadora Multimodal S.A. (Rumo), logistic segment (Logistic). The Company is also engaged in production and distribution of lubricants, through its indirect subsidiaries Cosan Lubrificantes e Especialidades S.A. (Moove) and Comma Oil & Chemicals Ltd. (Comma), under the Mobil licensed trademark in Brazil, Bolivia, Uruguay and Paraguay, in addition to the European and Asian market using the Comma brand and corporate activities (Lubricants).

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