Delek US Holdings, Inc. (DK): A Bull Case Theory

We came across a bullish thesis on Delek US Holdings, Inc. on LongTermValue Research’s Substack. In this article, we will summarize the bulls’ thesis on DK. Delek US Holdings, Inc.’s share was trading at $24.47 as of August 22^nd. DK’s trailing and forward P/E were 4.61 and 20.33 respectively according to Yahoo Finance.

Delek US Holdings (DK) is an integrated downstream energy refiner and logistics operator with four inland refineries across Texas, Arkansas, and Louisiana, and a majority stake in Delek Logistics (DKL), which manages over 1,500 miles of pipelines and terminals and pays a 10% dividend. DK’s ownership in DKL is valued at $1.46 billion against its enterprise value of $1.8 billion, implying a stub EV of only $343 million. Management estimates mid-cycle EBITDA at $343–493 million including cost savings, while independent estimates suggest $333 million excluding them, meaning the stub trades at just 1.0x EV/EBITDA when backing out the DKL stake.

DK also has outstanding petitions for small-refinery exemptions (SREs) covering 2016–2024, worth up to $1.8 billion; even a 50% relief would mean $900 million in payments, nearly triple the current stub value. Court filings indicate the EPA is preparing to issue decisions soon, presenting a major catalyst. Meanwhile, DK generates ~$140 million in mid-cycle free cash flow annually after DKL distributions, with management suggesting this could reach $300 million including cost reductions.

On a base case without SREs, fair value by Q4 2026 is estimated at $42.2 per share, or 70% upside, based on a 12% FCF yield and 3.5x mid-cycle EBITDA, versus peers at 6x. Over the next six quarters, DK is expected to reduce debt and repurchase shares, driving leverage below 1.0x. If SRE relief materializes, fair value rises to $58, or +135%, with additional upside from debt reduction, buybacks, and higher dividends. This combination of undervaluation, structural simplification, and regulatory catalysts makes DK a highly compelling special situation.

Previously we covered a bullish thesis on Delek US Holdings, Inc. (DK) by Matt Lindsay in May 2025, which highlighted DK’s undervaluation through its stake in Delek Logistics and a $47 SOTP value. The company’s stock has appreciated approximately by 36% since our coverage as execution improved sentiment. The thesis still stands, with LongTermValue Research sharing a similar view but emphasizing catalysts from small-refinery exemptions and stub valuation.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None.