Valero Energy Corp. (NYSE:VLO)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes experienced significant volatility over the analyzed period. A decline was observed in 2020, with NOPAT turning negative, indicating operational challenges or extraordinary expenses during that year. However, a substantial recovery took place in 2021 and 2022, where the profit increased markedly, peaking at the highest value recorded in 2022. In 2023, the NOPAT declined again but remained positive and significantly higher than the initial 2019 figure, suggesting a return to profitability though with some reduction compared to the previous peak.

Invested Capital

Invested capital showed a steady upward trend throughout the entire period. The growth in invested capital indicates continuous investment in the company's assets or business operations, rising from approximately 40.8 billion to over 51 billion US dollars by the end of 2023. This consistent increase reflects an expansion strategy or reinvestment of earnings back into the business infrastructure.

Return on Invested Capital (ROIC)

The return on invested capital mirrored the fluctuations observed in NOPAT but remained positive except for 2020, where the ROIC turned negative. After the downturn, ROIC rebounded strongly in 2021 and surged to a peak in 2022, reaching above 27%, which indicates an efficient utilization of capital during this period. However, the ROIC decreased in 2023 to approximately 15.4%, still representing a healthy return but noticeably lower than the previous year’s peak, suggesting some decline in capital efficiency or profit margins despite continued growth in invested capital.

Operating Profit Margin (OPM)

The operating profit margin experienced significant volatility over the analyzed period. Initially, it started at 4.62% in 2019, followed by a sharp decline into negative territory at -3.98% in 2020. Subsequently, there was a recovery and growth, reaching 5.33% in 2021, peaking at 9.65% in 2022, and then a moderate decrease to 7.27% in 2023. This suggests notable fluctuations in operational efficiency or market conditions impacting profitability.

Turnover of Capital (TO)

The turnover of capital demonstrated a declining trend from 2.66 in 2019 to 1.58 in 2020, indicative of a reduction in asset utilization efficiency during that year. Afterwards, there was a recovery to 2.56 in 2021 and a further increase to a peak of 3.54 in 2022, before a slight decline to 2.83 in 2023. Overall, the data shows variability but an upward trajectory post-2020, implying improved capital efficiency in recent years.

Effective Cash Tax Rate (CTR)

The effective cash tax rate was quite high throughout the period, starting at 88.48% in 2019, escalating to 100% in 2020, followed by gradual reductions to 91.47% in 2021, then 79.4% in 2022, and further down to 74.78% in 2023. The trend indicates a high tax burden with some alleviation beginning after 2020, potentially due to tax planning or changes in earnings composition.

Return on Invested Capital (ROIC)

ROIC showed pronounced fluctuations; it began at a positive 10.87% in 2019 but dropped sharply to a negative -4.03% in 2020, reflecting a loss or poor return on capital invested during that year. This was followed by a strong rebound to 12.49% in 2021, a significant surge to 27.16% in 2022, and a decline to 15.39% in 2023. The peak in 2022 highlights a period of notably effective capital deployment, while the subsequent decrease points to normalization or potential emerging challenges.

The financial data indicates several notable trends over the five-year period.

Net Operating Profit Before Taxes (NOPBT)

This metric exhibits significant volatility during the period. Starting at $5,005 million in 2019, it declined sharply to a negative $2,581 million in 2020, indicating a loss before taxes for that year. The company recovered strongly in 2021, posting a NOPBT of $6,080 million, followed by a substantial increase to $17,028 million in 2022. However, in 2023, the NOPBT decreased to $10,521 million, though it remained positive and well above the pre-pandemic level of 2019.

Revenues, Including Excise Taxes

Revenues followed a similar fluctuation pattern. The 2019 revenue was $108,324 million, which fell to $64,912 million in 2020, reflecting a significant decline likely due to adverse external conditions. Revenue rebounded strongly in 2021 to $113,977 million, then continued to grow substantially to $176,383 million in 2022. In 2023, revenues decreased to $144,766 million but stayed higher than the levels seen in 2019 and 2021.

Operating Profit Margin (OPM)

The operating profit margin mirrors the trends observed in profitability and revenue. Initially, the margin was moderate at 4.62% in 2019 but turned negative to -3.98% in 2020, indicating an operating loss margin. It recovered to a positive 5.33% in 2021 and improved further to a peak of 9.65% in 2022. The margin eased to 7.27% in 2023 but remained substantially above the margins before 2022.

Overall, the data suggests a strong recovery and growth in profitability and revenue after a significant downturn in 2020. The peak performance in 2022 was followed by a moderate decline in 2023, yet financial results remain robust relative to the earlier years. These fluctuations likely reflect external macroeconomic factors impacting operations, with the company showing resilience and an effective operational turnaround post-2020.

Revenue Trends

The revenues, inclusive of excise taxes on sales by certain foreign operations, exhibit considerable volatility over the five-year period. Starting from US$108.3 billion in 2019, revenues significantly declined in 2020 to approximately US$64.9 billion, reflecting a sharp contraction likely influenced by external economic factors. Subsequently, revenues rebounded sharply in 2021, reaching US$114.0 billion, nearly matching pre-pandemic levels. This upward trend continued strongly into 2022, peaking at US$176.4 billion, before experiencing a decline in 2023 to US$144.8 billion. Overall, the data indicates a recovery trajectory post-2020 disruption but with some retreat in the most recent year.

Invested Capital Movements

Invested capital shows a gradual but consistent increase across the analyzed period. Beginning with US$40.8 billion in 2019, it remains relatively stable in 2020 at US$40.97 billion. From 2021 onwards, invested capital grows steadily to US$44.5 billion, US$49.8 billion, and US$51.1 billion in 2023. This incremental rise indicates ongoing investment and expansion efforts within the company, reflecting either asset growth or increased capital deployment strategies.

Turnover of Capital (TO) Ratio

The turnover of capital ratio reveals meaningful fluctuations aligned with revenue volatility. Starting at a robust 2.66 in 2019, the ratio falls sharply to 1.58 in 2020, consistent with the revenue downturn, which reduced asset utilization efficiency. The ratio rebounds to 2.56 in 2021 and attains its highest level of 3.54 in 2022, signifying improved efficiency in generating revenues from invested capital during the period of peak sales. However, in 2023 the turnover of capital declines to 2.83, mirroring the drop in revenues and indicating a moderation in capital utilization efficiency.

Summary Insights

The analysis reveals a company impacted by a major revenue disruption in 2020, followed by a robust recovery peaking in 2022 and a partial contraction in 2023. Invested capital has grown steadily throughout the period, reflecting continued capital commitment. The turnover of capital ratio correlates strongly with revenue volatility, showing diminished efficiency during downturns and elevated utilization during revenue peaks. This pattern suggests sensitivity to market or operational conditions influencing revenue generation capabilities relative to invested resources.

The financial data reveals several notable trends over the five-year period examined.

Cash Operating Taxes

The cash operating taxes fluctuated significantly, starting at 577 million US$ in 2019, turning negative to -931 million US$ in 2020, which suggests either tax credits or refunds during that year. This was followed by a recovery to positive amounts in the subsequent years: 519 million US$ in 2021, rising sharply to 3,508 million US$ in 2022, then decreasing to 2,654 million US$ in 2023. The pattern indicates considerable volatility, with a peak in taxes paid in 2022, followed by a moderate reduction.

Net Operating Profit Before Taxes (NOPBT)

NOPBT showed a volatile trend as well. Beginning at 5,005 million US$ in 2019, it fell dramatically to a loss of -2,581 million US$ in 2020. This was followed by a strong rebound to 6,080 million US$ in 2021 and an impressive increase to 17,028 million US$ in 2022. However, in 2023, it decreased to 10,521 million US$. Despite the downturn in 2020 and 2023 from peak levels, the overall trend from 2019 to 2023 is one of significant growth in operating profit before taxes.

Effective Cash Tax Rate (CTR)

The effective cash tax rate was relatively low in 2019 at 11.52%, with no data available for 2020. It then decreased further to 8.53% in 2021, before rising to 20.6% in 2022 and increasing further to 25.22% in 2023. This rising tax rate in the latter years coincides with higher taxable profits, suggesting that the company subjected a larger portion of profit to taxation or experienced changes in tax regulations or tax planning.

Overall, the financial metrics indicate a recovery from a loss in 2020 to strong profitability in subsequent years, accompanied by increasing tax payments and rising effective cash tax rates. The volatility in tax payments and operating profits reflects a dynamic operating environment, with 2022 being a particularly strong year followed by a moderation in 2023.