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

Earnings & Valuation

This table compares BP and Valero Energy’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
BP $186.61 billion 0.76 $115.00 million $1.17 36.64
Valero Energy $75.66 billion 0.54 $2.29 billion $4.61 20.41

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

Volatility and Risk

BP has a beta of 0.97, suggesting that its stock price is 3% less volatile than the S&P 500. Comparatively, Valero Energy has a beta of 1.2, suggesting that its stock price is 20% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations for BP and Valero Energy, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
BP 2 7 8 0 2.35
Valero Energy 0 10 8 0 2.44

BP presently has a consensus price target of $37.73, suggesting a potential downside of 12.00%. Valero Energy has a consensus price target of $80.93, suggesting a potential downside of 13.99%. Given BP’s higher possible upside, research analysts plainly believe BP is more favorable than Valero Energy.

Profitability

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

Net Margins Return on Equity Return on Assets
BP 1.70% 4.52% 1.68%
Valero Energy 2.33% 9.87% 4.43%

Dividends

BP pays an annual dividend of $2.38 per share and has a dividend yield of 5.6%. Valero Energy pays an annual dividend of $2.80 per share and has a dividend yield of 3.0%. BP pays out 203.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Valero Energy pays out 60.7% of its earnings in the form of a dividend. BP has raised its dividend for 7 consecutive years. BP is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

9.9% of BP shares are owned by institutional investors. Comparatively, 81.3% of Valero Energy shares are owned by institutional investors. 1.0% of BP shares are owned by company insiders. Comparatively, 0.5% of Valero Energy shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Summary

Valero Energy beats BP on 9 of the 16 factors compared between the two stocks.

About BP

BP p.l.c. is an integrated oil and gas company. The Company owns an interest in OJSC Oil Company Rosneft (Rosneft), an oil and gas company. The Company’s segments include Upstream, Downstream, Rosneft, and Other businesses and corporate. The Upstream segment is engaged in oil and natural gas exploration, field development and production, as well as midstream transportation, storage and processing. The Downstream segment has global manufacturing and marketing operations. The Rosneft segment has a resource base of hydrocarbons onshore and offshore. The Other businesses and corporate segment comprises the biofuels and wind businesses, shipping and treasury functions, and corporate activities around the world. The Company provides its customers with fuel for transportation, energy for heat and light, lubricants to keep engines moving and the petrochemicals products used to make everyday items as diverse as paints, clothes and packaging.

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.

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