Valero Energy Corporation (VLO Quick QuoteVLO - Free Report) has jumped 112.8% year to date (YTD), outperforming the industry’s 107.9% growth. Phillips 66 (PSX Quick QuotePSX - Free Report) and Par Pacific Holdings, Inc. (PARR Quick QuotePARR - Free Report) , belonging to the same space, have gained 90.4% and 93.7%, respectively, over the same time span.

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Should investors bet on the stock’s momentum? Before making investment decisions, one should consider the company's overall business environment and fundamentals.

VLO's Heavy Crude Processing Advantage Supports Growth

West Texas Intermediate (“WTI”) crude is hovering around $90 per barrel, according to Oilprice.com. The crude price is still very high and has kept the input costs elevated for refiners such as VLO, PSX and PARR. However, unlike many refiners, Valero Energy has a heavy crude advantage, as heavy crude is cheaper than light crude like WTI.

Regarding the company’s access to diverse crude feedstocks, Valero has an advantage because its Gulf Coast refineries can buy crude oil from many low-cost sources, including the United States, Canada and Venezuela. This gives the company more flexibility to purchase cheaper oil, which helps keep refining costs low and can boost profits when competitors have fewer sourcing options.

Constrained Global Refining Capacity is a Boon for VLO?

Global refining capacity is constrained and fuel inventories are low. On the demand side, gasoline and diesel remain resilient. This means people are still driving frequently, while diesel demand suggests transportation and freight activity are holding up. As a result, with busy refineries and fuel not in abundant supply, refining margins for refiners are quite strong.

With crude prices likely to remain high, investors shouldn’t allocate their money only to exploration and production companies but also to refining players like VLO, even though high crude prices have been increasing refiners’ input costs.

VLO’s Strong Balance Sheet & Solid Shareholder Returns

The leading refining company ended the September quarter of 2026 with a net debt-to-capitalization of just 4%. Its quarter-end cash balance was a handsome $9.8 billion, reflecting a sound financial position.

Thus, the company can lean on its balance sheet to combat an uncertain business environment, reflecting its relatively stable business model compared to other players with a weaker balance sheet. The refining major is also focused on returning capital to shareholders, as reflected in its solid shareholder cash payout ratio of 52% in the third quarter.

Investors should also note that Valero, with 14 refineries and a combined throughput capacity of roughly 3 million barrels per day, has witnessed upward earnings estimate revisions for 2026 over the past seven days.

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Should Investors Bet on the Stock?

Coming to the valuation picture, Valero Energy is currently considered cheap on a relative basis, with the stock trading at a 4.38x 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 4.50x. Two other refiners, Phillips 66 and Par Pacific Holdings, are currently trading at 6.80x trailing 12-month EV/EBITDA and 1.97x trailing 12-month EV/EBITDA, respectively.

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With the business environment remaining favorable and the stock currently undervalued, investors should bet on the refining player right away, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.