South Bow (NYSE:SOBO – Get Free Report) and Valero Energy (NYSE:VLO – Get Free Report) are both energy companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, institutional ownership, profitability, valuation, analyst recommendations, risk and dividends.
Earnings and Valuation
This table compares South Bow and Valero Energy”s gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| South Bow | $1.99 billion | 3.62 | $433.00 million | $2.21 | 15.62 |
| Valero Energy | $122.69 billion | 1.00 | $2.35 billion | $24.10 | 17.68 |
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.
Insider & Institutional Ownership
78.7% of Valero Energy shares are held by institutional investors. 0.4% of Valero Energy shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.
Volatility and Risk
South Bow has a beta of 0.22, indicating that its share price is 78% less volatile than the S&P 500. Comparatively, Valero Energy has a beta of 0.59, indicating that its share price is 41% less volatile than the S&P 500.
Dividends
South Bow pays an annual dividend of $2.00 per share and has a dividend yield of 5.8%. Valero Energy pays an annual dividend of $4.80 per share and has a dividend yield of 1.1%. 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 pays out 19.9% of its earnings in the form of a dividend. Valero Energy has raised its dividend for 4 consecutive years.
Analyst Recommendations
This is a breakdown of recent ratings for South Bow and Valero Energy, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| South Bow | 4 | 7 | 4 | 0 | 2.00 |
| Valero Energy | 1 | 8 | 9 | 2 | 2.60 |
South Bow currently has a consensus target price of $32.50, suggesting a potential downside of 5.82%. Valero Energy has a consensus target price of $385.75, suggesting a potential downside of 9.46%. Given South Bow’s higher probable upside, equities analysts clearly believe South Bow is more favorable than Valero Energy.
Profitability
This table compares South Bow and Valero Energy’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| South Bow | 22.99% | 15.84% | 3.73% |
| Valero Energy | 5.17% | 26.74% | 11.92% |
Summary
Valero Energy beats South Bow on 14 of the 18 factors compared between the two stocks.
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.
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.
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