South Bow (NYSE:SOBO) versus Valero Energy (NYSE:VLO) Financial Review

Valero Energy (NYSE:VLO) and South Bow (NYSE:SOBO) are both energy companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, analyst recommendations, valuation, profitability, earnings, dividends and risk.

Profitability

This table compares Valero Energy and South Bow’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Valero Energy	5.17%	26.74%	11.92%
South Bow	22.99%	15.84%	3.73%

Dividends

Valero Energy pays an annual dividend of $4.80 per share and has a dividend yield of 1.1%. South Bow pays an annual dividend of $2.00 per share and has a dividend yield of 5.8%. Valero Energy pays out 19.9% of its earnings in the form of a dividend. South Bow pays out 90.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Valero Energy has raised its dividend for 4 consecutive years.

Valuation and Earnings

This table compares Valero Energy and South Bow”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Valero Energy	$122.69 billion	1.00	$2.35 billion	$24.10	17.68
South Bow	$1.99 billion	3.62	$433.00 million	$2.21	15.62

Valero Energy has higher revenue and earnings than South Bow. South Bow is trading at a lower price-to-earnings ratio than Valero Energy, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

78.7% of Valero Energy shares are owned by institutional investors. 0.4% of Valero Energy shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Valero Energy and South Bow, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Valero Energy	1	8	9	2	2.60
South Bow	4	7	4	0	2.00

Valero Energy currently has a consensus target price of $385.75, indicating a potential downside of 9.46%. South Bow has a consensus target price of $32.50, indicating a potential downside of 5.82%. Given South Bow’s higher possible upside, analysts plainly believe South Bow is more favorable than Valero Energy.

Volatility & Risk

Valero Energy has a beta of 0.59, indicating that its stock price is 41% less volatile than the S&P 500. Comparatively, South Bow has a beta of 0.22, indicating that its stock price is 78% less volatile than the S&P 500.

Summary

Valero Energy beats South Bow on 14 of the 18 factors compared between the two stocks.

About Valero Energy

Valero Energy Corporation manufactures, markets, and sells petroleum-based and low-carbon liquid transportation fuels and petrochemical products in the United States, Canada, the United Kingdom, Ireland, Latin America, Mexico, Peru, and internationally. It operates through three segments: Refining, Renewable Diesel, and Ethanol. The company produces California Reformulated Gasoline Blendstock for Oxygenate Blending and Conventional Blendstock for Oxygenate Blending gasolines, CARB diesel, diesel, jet fuel, heating oil, and asphalt; feedstocks; aromatics; sulfur and residual fuel oil; intermediate oils; and sulfur, sweet, and sour crude oils. It sells its refined products through wholesale rack and bulk markets; and through outlets under the Valero, Beacon, Diamond Shamrock, Shamrock, Ultramar, and Texaco brands. The company owns and operates renewable diesel and ethanol plants, as well as produces renewable diesel and naphtha under the Diamond Green Diesel brand name. In addition, it offers ethanol and various co-products, including dry distiller grains, syrup, and inedible distillers corn oil to animal feed customers. The company was formerly known as Valero Refining and Marketing Company and changed its name to Valero Energy Corporation in August 1997. Valero Energy Corporation was founded in 1980 and is headquartered in San Antonio, Texas.

About South Bow

South Bow Corp is a strategic liquids pipeline company. It is a new liquids-focused midstream infrastructure company. South Bow Corp is based in Canada.