Valero Energy Corp. (NYSE:VLO)

Return on Assets (ROA)

The ROA data begins in the first quarter of 2020, showing an initial value of 4.5%, which rapidly declines to 0.9% and then to 2.18% by the third quarter of 2020. A sharp decrease follows, with ROA turning negative at the end of 2020 and continuing to exhibit negative or near-zero values through the first quarter of 2021, signaling operational challenges or lower asset profitability during this period. From the second quarter of 2021 onwards, ROA begins a notable recovery, moving from negative figures to positive gains reaching 1.61%. This upward trajectory accelerates significantly throughout 2022 and early 2023, peaking at 22.75% in the fourth quarter of 2023. However, after this peak, there is a gradual decline over subsequent quarters, decreasing to 6.11% by the third quarter of 2024. This pattern indicates strong improvement in asset utilization and profitability starting mid-2021, peaking in late 2023, followed by a moderate reduction.

Financial Leverage

The financial leverage ratio is fairly stable across the observed periods, fluctuating within a narrow band. Initially, it hovers around 2.43 to 2.47 from early 2019 through early 2020, then rises steadily to a peak of 3.21 in the first quarter of 2022. After reaching this high, there is a consistent downward trend in leverage through 2022 and 2023, declining to approximately 2.35 in the third quarter of 2023. The ratio slightly rebounds in the final recorded quarters, stabilizing near 2.4 to 2.5 by mid-2024. The pattern reflects a period of increasing leverage culminating in early 2022, followed by deleveraging and capital structure consolidation efforts in subsequent periods.

Return on Equity (ROE)

ROE follows a pattern somewhat similar to ROA, with initial positive values at 11.11% in the first quarter of 2020, but then sharply dropping to 2.28% and fluctuating near zero or negative through late 2020 and early 2021. The lowest points occur through the end of 2020 and the start of 2021, reaching negative returns as low as -7.73%. Beginning around the second quarter of 2021, ROE begins a robust recovery, climbing steadily and rapidly into 2022 and the first half of 2023. The ratio reaches a peak of 54.81% in the fourth quarter of 2023, indicating extraordinarily high returns to equity holders during this peak performance period. Thereafter, ROE experiences a decline, dropping to 14.62% by the third quarter of 2024, suggesting a cooling off from peak profitability. The trend suggests strong operational and financial performance improvements starting mid-2021, with notable equity returns peaking towards late 2023, followed by a moderation.

Overall Insights

The analysis reveals that the company experienced a challenging phase during 2020 and early 2021, as shown by low or negative returns on assets and equity. This period also coincides with elevated financial leverage, which peaked in early 2022. From mid-2021 onward, both ROA and ROE improved significantly, reflecting better asset efficiency and profitability, possibly due to operational improvements, market recovery, or favorable external conditions. The peak financial performance occurred late in 2023, with exceptionally high ROE and ROA values. Subsequently, there was a decline in profitability measures along with a stabilization of financial leverage at moderate levels. This suggests a normalization after the peak phase, indicating either a more balanced growth phase or potential headwinds affecting margins. The deleveraging trend after early 2022 indicates cautious management of capital structure during the periods of both initial stress and subsequent recovery.

The analysis of the quarterly financial ratios reveals distinct patterns and trends in profitability, operational efficiency, leverage, and shareholders' returns over the observed periods.

Net Profit Margin

The net profit margin exhibits volatility in the early periods, with slight positive margins around early 2020 followed by a brief dip into negative territory through 2020 and early 2021. Beginning from the first quarter of 2022, there is a notable upward trend, peaking at 7.86% in December 2022. Thereafter, margins moderately decline but remain positive, stabilizing around mid-single digits into mid-2024.

Asset Turnover

Asset turnover ratios display an initial decline from early 2020, starting at above 2.0 and falling to approximately 1.19 by mid-2021. Subsequently, a recovery phase begins, with steady increases peaking approximately at 2.9 by early 2023. Afterward, a slight decline is observed, with ratios settling around 2.2 during mid-2024. Overall, this indicates fluctuating efficiency in asset utilization with a strong recovery post-2021.

Financial Leverage

Financial leverage ratios show relative stability with minor fluctuations. Beginning just above 2.4, leverage peaks around 3.21 in early 2022, indicating increased reliance on debt or liabilities relative to equity during that period. Following this peak, the leverage ratio trends downward, reaching approximately 2.39 by mid-2024, suggesting a gradual reduction in leverage and potentially more conservative financial structuring.

Return on Equity (ROE)

Return on equity follows a pattern closely related to net profit margin trends but with greater volatility. Initial ROE figures fluctuate widely with negative values during parts of 2020 and 2021, reflecting challenging performance periods. From early 2022 onward, a sharp rise in ROE is observed, reaching an exceptionally high peak of 54.81% by December 2022. Subsequently, the ROE experiences a declining trend but remains robust, stabilizing around mid-teens by mid-2024. This pattern suggests significant improvements in generating shareholder returns during the recent periods, albeit with some moderation after the peak.

In summary, the financial data indicates a period of initial instability and weakness in profitability and returns through 2020 and early 2021, followed by a pronounced recovery phase starting in 2022. Operational efficiency as measured by asset turnover recovers strongly after mid-2021, while leverage peaked early in 2022 and then gradually decreased. The marked improvement in ROE post-2021 aligns with rising profit margins and asset utilization, highlighting enhanced overall financial performance during the most recent periods despite moderate declines toward mid-2024.

The analyzed financial ratios demonstrate notable fluctuations and trends over the observed periods. The tax burden ratio, when available, shows relative stability hovering around the range of 0.76 to 0.79 in recent years, indicating a consistent proportion of income paid as tax.

The interest burden ratio exhibits significant variability in earlier periods, with a negative value of -1.21 for December 31, 2019, suggesting extraordinary financial conditions or accounting anomalies during that quarter. Subsequently, the ratio stabilizes, gradually improving to values near 0.95 before slightly declining toward 0.89 in the most recent quarter, reflecting better management of interest expenses relative to earnings.

The EBIT margin reveals a recovery and strengthening trend after a period of negative margins in 2019 and early 2020. Starting from low single digits and occasional negative values, there is a clear upward trajectory peaking at 10.51% by the first quarter of 2023, followed by a moderating but still positive margin around 3.95% in the latest quarter. This pattern suggests operational improvements and enhanced profitability over time.

Asset turnover ratios show a general increase, rising from approximately 1.25 in early 2020 to approximately 2.9 in early 2023. This suggests improved efficiency in utilizing assets to generate revenue. However, a mild regression toward 2.2–2.4 is observed in the most recent periods, indicating a slight decrease in asset use efficiency.

Financial leverage remains relatively elevated and fairly stable throughout the time frame, with ratios mostly ranging from 2.35 to 3.21. The highest leverage values occur in 2021 and early 2022, followed by a decline back to levels around 2.4 in the most recent quarters. These figures indicate consistent leverage utilization with some reduction in recent periods.

Return on equity (ROE) experiences considerable variation, initially negative or low between 2019 and 2020, reflecting challenging profitability conditions. However, there is a marked increase from 2021 onwards, reaching a peak of nearly 55% in late 2022. This peak is followed by a gradual decline, with the latest data showing ROE around 14.6%. This trend implies a phase of strong profitability growth followed by moderation in returns to shareholders.

The analyzed financial metrics exhibit distinct trends over the observed quarterly periods, highlighting shifts in profitability, operational efficiency, and asset utilization.

Net Profit Margin (%)

The net profit margin shows notable volatility in the early part of the timeline, initially registering small positive figures followed by periods of negative profitability around 2019 and early 2020. Starting in 2021, a recovery trend becomes evident, with margin values turning positive and gradually improving. Significant margin expansion is observed from early 2022 through 2023, peaking at above 7% in late 2023. Subsequently, a gradual decline occurs in early 2024, descending to approximately 2.74% by the most recent quarter.

Asset Turnover (ratio)

Asset turnover ratios indicate the company's efficiency in utilizing assets to generate revenue. After moderate fluctuations early in the period, the ratio trends upward from late 2020 onwards, reaching a peak near 2.9 during 2022 and into early 2023. This suggests improved operational efficiency during this timeframe. Post-peak, the ratio slightly decreases but remains within a relatively stable range above 2.0, indicating maintained effectiveness in asset use.

Return on Assets (ROA) (%)

ROA, reflecting overall profitability relative to assets, mirrors the variability seen in net profit margin during the earlier quarters, including negative values around 2019 and early 2020. Starting in 2021, ROA demonstrates a strong upward trajectory, sharply increasing to a peak of nearly 23% in late 2022. After this peak, ROA begins a steady decline through 2023 and into 2024, but values remain well above historical lows, indicating sustained but moderating returns on assets.

Overall, the data reveals a period of initial financial difficulty or adjustment, with negative or low profitability and returns, followed by a robust recovery marked by improved margins, asset utilization, and returns. The peak performance period occurs mainly during 2022, with subsequent stabilization and moderate declines in early 2024. These patterns suggest the company has enhanced operational efficiency and profitability over time, though recent trends may warrant monitoring to ascertain if the declines continue or stabilize.

The analysis of the quarterly financial data reveals several noteworthy trends in the company’s operational efficiency, profitability, and financial burdens over the specified periods.

Tax Burden

The tax burden ratio demonstrates relative stability over the observed periods. Starting from a level around 0.78 in early 2020, it slightly fluctuates but remains close to 0.77–0.79 through to mid-2024. This indicates a fairly consistent proportion of earnings paid as taxes, with minimal volatility.

Interest Burden

This ratio exhibits more variability. Early in 2020, there is a sharp decline to 0.50 in mid-year and even a negative value in the fourth quarter, indicating potential issues with interest expenses or financial costs impacting earnings. From 2021 onward, the interest burden ratio improves gradually, stabilizing between 0.93 and 0.97 mostly, suggesting better management of interest expenses and improved earnings before interest and taxes relative to operating income.

EBIT Margin

The EBIT margin shows significant fluctuations initially, with negative margins evident through much of 2020 and early 2021, reflecting operational challenges or cost pressures during this period. However, from late 2021 onwards, there is a strong upward trend, reaching a peak of 10.51% in the first quarter of 2023. This improvement signals enhanced operational profitability. Margins then show a gradual decline through 2023 and into mid-2024, though remaining positive, reflecting a moderation but still relatively healthy profitability.

Asset Turnover

This ratio highlights the efficiency with which the company uses its assets to generate sales. Starting around 2.0 in early 2019, there is a decline into 2020, dropping to as low as 1.19 in the second quarter of 2020. Subsequently, a steady recovery is observed, with asset turnover improving to nearly 2.9 by late 2022 and early 2023, before slightly decreasing to around 2.2 by mid-2024. This suggests fluctuating asset utilization efficiency, negatively impacted during 2020 but rebounding strongly afterward.

Return on Assets (ROA)

ROA mirrors the trends seen in profitability and efficiency metrics. It exhibits negative and near-zero values through much of 2020 and early 2021, implying low returns on investments in assets during periods of distress or lower earnings. From 2021 into 2023, ROA experiences substantial growth, reaching nearly 23% at its peak in late 2022 or early 2023, demonstrating a return to robust profitability and effective use of assets. After this peak, ROA decreases gradually but remains positive, indicating sustained but moderated profitability.

Overall, the data indicates that the company faced significant operational and financial challenges around 2020, likely influenced by external or sector-specific disruptions. Since then, it has experienced a strong recovery in profitability and asset efficiency, despite some moderation in the most recent quarters. The stabilization of tax and interest burdens supports improved earnings quality. The fluctuating but generally improving asset turnover and ROA point to enhanced operational performance and more effective asset utilization over time.

Tax Burden

The tax burden ratio exhibits a relatively stable pattern in the periods with data available. In early 2020, it fluctuated between 0.78 and 0.92, followed by consistent stability around 0.77 to 0.79 from 2022 through mid-2024. This indicates that the proportion of income paid in taxes has remained fairly consistent over time.

Interest Burden

The interest burden ratio shows greater variability, particularly in 2020 when it dropped to a low of 0.5 and even reached a negative value (-1.21) at the end of 2020. Beginning in 2022, the ratio stabilized and improved, fluctuating between 0.66 and 0.97 until early 2023. From late 2023 onward, the interest burden ratio shows a slight declining trend, moving from 0.95 in March 2023 to 0.89 in September 2024, suggesting a modest reduction in interest expenses relative to earnings.

EBIT Margin

The EBIT margin experienced significant volatility, with negative values noted in late 2019 and early 2021, reaching a low of -2.71% in December 2019. However, from 2021 onward, the margin improved considerably, peaking at 10.51% in June 2023. Following this peak, a gradual decline is observed through to September 2024, where the margin decreases to 3.95%. The upward trend from 2021 to mid-2023 indicates improved operating profitability, while the subsequent decline may reflect emerging challenges or increased costs affecting earnings before interest and taxes.

Net Profit Margin

Net profit margins mirror the volatility seen in EBIT margins, with negative margins during several quarters between 2019 and early 2021, including a low of -2.19% in March 2021. From mid-2021 onward, there is a consistent positive trend with margins improving to a peak of 7.86% in June 2023. After this peak, net profit margins exhibit a decreasing trend, dropping to 2.74% by September 2024. This trajectory suggests recovery from losses in the earlier periods, with a peak period of profitability followed by a downward adjustment possibly influenced by increased expenses or reduced operational efficiency.