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Par Pacific Surges 148% in a Year: Should You Bet on the Momentum?
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Key Takeaways
PARR surged 147.8% in a year, outperforming the industry's 118.6% growth and peers in the refining space.
PARR's crude mix includes waterborne supplies and 19% Canadian heavy oil, giving it sourcing flexibility.
PARR's July refining index was $31.34 per barrel, while its 3.50x EV/EBITDA trails the 5.83x industry average.
Par Pacific Holdings Inc. (PARR - Free Report) has jumped a whopping 147.8% in a year, outperforming the industry’s 118.6% growth. Phillips 66 (PSX - Free Report) and Valero Energy Corporation (VLO - Free Report) , belonging to the same space, have surged 95.1% and 144.6%, respectively, over the same time frame.
Image Source: Zacks Investment Research
The price chart reflects investors' strong preference for PARR stock. However, before making investment decisions, one should consider the company's overall business environment and fundamentals.
PARR’s Diverse Crude Mix Boosts Refining Economics
Instead of relying on a single source of crude, PARR has been depending on crude from a variety of sources, comprising U.S. inland oil fields, waterborne sources and Canadian heavy crude.
Notably, a significant portion of crude oil sources is waterborne, while 19% 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.
Because it has exposure to Canadian heavy oil, which is cheaper than lighter crude, Par Pacific is likely 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 and helping it continue its upward trajectory.
Image Source: Par Pacific Holdings Inc
PARR’s Refining Margin to Remain Strong
Par Pacific continued to benefit from a strong refining market at the start of the third quarter. Its refining index, which is a rough measure of how profitable it is to turn crude oil into products like gasoline and diesel, was still very high in July at $31.34 per barrel, slightly below the second-quarter average of about $33. Demand for fuels remained strong, especially on the mainland, while global fuel inventories stayed relatively tight. In simple terms, there was still healthy demand for refined products and limited excess supply, which helped PARR continue earning attractive margins from its refineries.
PARR appears well-positioned to benefit from still-strong refining margins, firm fuel demand and tight global product inventories. The favorable business environment is also likely to aid refiners like PSX and VLO.
PARR is currently considered cheap on a relative basis, with the stock trading at 3.50x trailing 12-month Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortization (EV/EBITDA), which is a discount compared with the broader industry average of 5.83x. Valero Energy and Phillips 66 are valued at 8.09x and 11.51x, respectively.
Image Source: Zacks Investment Research
Should You Bet on the Stock?
Despite PARR’s solid stock price rally, the stock seems well-positioned to further benefit from the favorable refining environment. Hence, this might be a good time to bet on it. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
View the Zacks #1 Rank List
Image: Bigstock
Par Pacific Surges 148% in a Year: Should You Bet on the Momentum?
Key Takeaways
Par Pacific Holdings Inc. (PARR - Free Report) has jumped a whopping 147.8% in a year, outperforming the industry’s 118.6% growth. Phillips 66 (PSX - Free Report) and Valero Energy Corporation (VLO - Free Report) , belonging to the same space, have surged 95.1% and 144.6%, respectively, over the same time frame.
The price chart reflects investors' strong preference for PARR stock. However, before making investment decisions, one should consider the company's overall business environment and fundamentals.
PARR’s Diverse Crude Mix Boosts Refining Economics
Instead of relying on a single source of crude, PARR has been depending on crude from a variety of sources, comprising U.S. inland oil fields, waterborne sources and Canadian heavy crude.
Notably, a significant portion of crude oil sources is waterborne, while 19% 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.
Because it has exposure to Canadian heavy oil, which is cheaper than lighter crude, Par Pacific is likely 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 and helping it continue its upward trajectory.
PARR’s Refining Margin to Remain Strong
Par Pacific continued to benefit from a strong refining market at the start of the third quarter. Its refining index, which is a rough measure of how profitable it is to turn crude oil into products like gasoline and diesel, was still very high in July at $31.34 per barrel, slightly below the second-quarter average of about $33. Demand for fuels remained strong, especially on the mainland, while global fuel inventories stayed relatively tight. In simple terms, there was still healthy demand for refined products and limited excess supply, which helped PARR continue earning attractive margins from its refineries.
PARR appears well-positioned to benefit from still-strong refining margins, firm fuel demand and tight global product inventories. The favorable business environment is also likely to aid refiners like PSX and VLO.
PARR is currently considered cheap on a relative basis, with the stock trading at 3.50x trailing 12-month Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortization (EV/EBITDA), which is a discount compared with the broader industry average of 5.83x. Valero Energy and Phillips 66 are valued at 8.09x and 11.51x, respectively.
Should You Bet on the Stock?
Despite PARR’s solid stock price rally, the stock seems well-positioned to further benefit from the favorable refining environment. Hence, this might be a good time to bet on it. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.