Valero Energy Corp. (NYSE:VLO)

The financial data reveal significant fluctuations in the company's profitability as measured by Net Operating Profit After Taxes (NOPAT) over the five-year period. After a positive NOPAT in 2019, the company experienced a substantial loss in 2020, followed by a strong recovery in 2021 and a peak in 2022 before a marked decline in 2023. This pattern indicates volatility in operating performance, with 2022 representing the highest operational profitability within the analyzed timeframe.

The Cost of Capital exhibits moderate variation over the period, decreasing slightly from 15.5% in 2019 to 14.16% in 2020, then gradually increasing to peak at 17.07% in 2022, before a minor decrease to 16.9% in 2023. The rising cost of capital later in the timeline may reflect changes in market conditions or perceived risks associated with the company’s operations.

Invested Capital shows a consistent year-over-year increase across the period, rising from approximately $40.8 billion in 2019 to $51.1 billion in 2023. This upward trend indicates sustained investment and possible expansion or asset acquisition efforts. However, the growth in invested capital outpaces the gains in economic profit in the latter years, which may impact overall value creation metrics.

Economic Profit, which accounts for the cost of capital, remains negative in four out of five years, indicating that the company did not consistently generate returns exceeding its capital costs. The negative economic profit widens significantly in 2020, aligning with the sharp NOPAT loss, and again becomes slightly negative in 2023. Only in 2022 does economic profit turn positive, which corresponds with the peak NOPAT and highest cost of capital, suggesting that operational performance in that year sufficiently covered the increased cost of capital.

Overall, the data reflect a challenging operational environment with volatility in profitability, rising costs of capital, and increased invested capital. The positive economic profit in 2022 stands out as an exceptional year, while the general trend indicates pressure on value creation due to fluctuating operational results and capital costs.

Net Operating Profit After Taxes (NOPAT)

Volatile performance with a significant loss in 2020, recovery and peak in 2022, followed by decline in 2023.

Cost of Capital

Moderate fluctuations with a general upward trend peaking in 2022, indicating changing market or risk perceptions.

Invested Capital

Consistent growth in invested capital from 2019 to 2023, reflecting ongoing investment or asset growth.

Economic Profit

Predominantly negative, reflecting challenges in generating returns above capital costs except for 2022 when economic profit was positive.

Net Income (Loss) Attributable to Stockholders

The net income experienced a significant decline in the year ending 2020, moving from a positive 2,422 million US dollars in 2019 to a negative 1,421 million US dollars. This was followed by a recovery period, with net income rising to 930 million US dollars in 2021. The company then showed strong profitability in 2022, reaching 11,528 million US dollars, before seeing a decrease to 8,835 million US dollars in 2023. Overall, this pattern indicates volatility with a substantial rebound post-2020.

Net Operating Profit After Taxes (NOPAT)

The NOPAT data mirrors the trends seen in net income, starting at 4,429 million US dollars in 2019 and dropping to negative 1,650 million US dollars in 2020. There was a pronounced recovery in 2021, with NOPAT increasing to 5,561 million US dollars. The highest value in the series occurred in 2022, with 13,520 million US dollars, followed by a reduction to 7,868 million US dollars in 2023. This fluctuation highlights a similar pattern of operational profitability impact and recovery as observed in net income.

The analysis of the annual financial data reveals significant fluctuations in the income tax expense (benefit) and cash operating taxes over the five-year period.

Income Tax Expense (Benefit)

The income tax expense exhibited a notable negative value in 2020, reaching a benefit of -$903 million, which contrasts sharply with the positive expense of $702 million in 2019. Following this period, the tax expense rose to $255 million in 2021, before surging substantially to $3,428 million in 2022. In 2023, this figure decreased somewhat but remained elevated at $2,619 million, indicating a return to significant tax liabilities compared to the earlier years.

Cash Operating Taxes

Cash operating taxes mirrored the trend seen in the income tax expense, with a negative outflow of -$931 million in 2020 compared to $577 million in 2019. Subsequently, there was a marked increase to $519 million in 2021, which escalated dramatically to $3,508 million in 2022. In the most recent year, 2023, cash operating taxes declined slightly to $2,654 million, but still remained considerably higher than pre-2020 levels.

Overall, the data indicates a period of tax benefit in 2020 followed by a consistent and substantial increase in tax expenses and cash operating taxes in the subsequent years. The sharp rise in both metrics during 2022 and 2023 suggests changes in earnings, tax policies, or other factors impacting the company's tax payable status, resulting in a significantly higher cash outflow related to taxes despite the decrease from the 2022 peak.

Total reported debt & leases

The total reported debt and leases exhibited a rising trend from 2019 to 2020, increasing from $10,962 million to $15,847 million. Subsequently, there was a consistent decline over the next three years, with figures decreasing to $15,125 million in 2021, then dropping more significantly to $12,722 million in 2022, and further to $12,637 million by the end of 2023. This indicates a period of increased leverage followed by a notable reduction in debt levels.

Total Valero Energy Corporation stockholders’ equity

Stockholders' equity showed a downward trajectory between 2019 and 2021, falling from $21,803 million to $18,430 million. However, a reversal occurred in 2022 when equity increased sharply to $23,561 million and continued to grow substantially to $26,346 million in 2023. This pattern suggests an initial period of equity erosion followed by a recovery and strengthening of the equity base.

Invested capital

Invested capital demonstrated a mostly steady upward movement over the five-year span. Starting at $40,757 million in 2019, it slightly increased in 2020 to $40,966 million, then advanced more markedly to $44,526 million in 2021. The growth trend continued with an increase to $49,772 million in 2022, reaching $51,119 million in 2023. This represents ongoing investment and capital deployment over the period.

Summary

Overall, the financial data reflect a phase of increased debt leverage in 2020, followed by deliberate deleveraging from 2021 onward. Concurrently, stockholders’ equity declined in the early years but rebounded strongly in the latest two years, indicating improved financial health or retained earnings accumulation. The continuous growth in invested capital suggests sustained investment efforts, aligning with the strengthening equity position and reduced reliance on debt financing during the latter years.

The financial analysis reveals notable fluctuations in key performance indicators over the five-year period. The economic profit demonstrates significant volatility, moving from a loss of US$1,888 million in 2019 to a much larger loss of US$7,449 million in 2020. This was followed by a reduction in losses to US$1,088 million in 2021, a positive turnaround to a gain of US$5,022 million in 2022, and then returning to a loss of US$773 million in 2023.

Invested capital showed a general upward trend throughout the period, increasing steadily from US$40,757 million at the end of 2019 to US$51,119 million by the end of 2023. This growth suggests a continual allocation of resources and expansion of the capital base.

The economic spread ratio, which reflects the difference between the return on invested capital and its cost, mirrored the pattern of economic profit. It was negative throughout most of the period except in 2022, where it reached a positive 10.09%. The ratio declined from -4.63% in 2019 to -18.18% in 2020, improved to -2.44% in 2021, turned positive in 2022, and then slipped back to -1.51% in 2023.

Economic Profit

Displayed high volatility with a deep loss in 2020, improved significantly in 2021, peaked positively in 2022, and declined again in 2023, indicating fluctuating profitability over the years.

Invested Capital

Consistently increased each year, suggesting ongoing investment and possibly expansion efforts regardless of profit fluctuations.

Economic Spread Ratio

Mostly negative, reflecting returns below capital costs for four out of five years, except in 2022 when it turned positive, indicating a temporary period of value creation.

Overall, the data indicates that the company experienced significant earnings challenges, particularly in 2020, but showed potential for recovery in 2022. Nevertheless, sustained value creation remains uncertain based on the reversion to negative economic spread and economic profit in 2023 despite growing invested capital.

The financial data reveals notable fluctuations over the five-year period under review. Revenue, expressed in millions of U.S. dollars, demonstrated a decreasing trend in 2020 followed by a significant recovery and peak in 2022, before declining somewhat again in the latest year. This pattern suggests an initial impact likely due to external factors, with a subsequent rebound and partial correction thereafter.

The measure of economic profit, also in millions of U.S. dollars, mirrors some of this volatility but on a more pronounced scale. It began with a negative value in 2019, further deteriorated substantially in 2020, then improved markedly in 2021 and transitioned into positive territory in 2022. However, the latest year saw a return to negative economic profit, although at a less severe level than the earlier troughs. This indicates variability in value creation, possibly reflecting changes in operational efficiency, costs, or market conditions.

The economic profit margin, represented as a percentage, aligns with the trends observed in economic profit. The margin was negative throughout the period, indicating that economic profit was below zero for most years, except for 2022 when it became positive. The margin reached its lowest point in 2020 and sharply recovered by 2022, suggesting that profitability relative to revenues notably improved before declining again in the following year.

Revenue Trends

The data shows a sharp revenue decline in 2020, likely due to significant external disruptions, followed by a strong recovery in 2021 and 2022. The downward adjustment in 2023 may imply market stabilization or other influencing factors impacting sales.

Economic Profit Behavior

Economic profit's large loss in 2020 indicates significant value destruction, possibly linked to operational or market challenges. The improvement towards positivity in 2022 signals a period of economic value creation, but the reversion to a negative number in 2023 suggests challenges remain.

Profit Margin Insights

The economic profit margin highlights profitability relative to revenue, showing considerable volatility with a nadir in 2020. The positive margin in 2022 reflects effective cost control or improved operational performance during that year, followed by a decline in the most recent year.

Overall, the data reflects a period of significant economic stress and recovery efforts, with 2020 representing the nadir likely due to extraordinary circumstances, and 2022 illustrating a turnaround in profitability and economic value. The decline in 2023 implies ongoing challenges that require attention to restore sustained economic profit.