Exxon Mobil Corporation (NYSE:XOM) is expected to earn $7.96 per share this year, which gives us a P/E of 11.8 times this year’s expected earnings. The company is expected to grow its earnings modestly growing forward, but their estimates don’t vary nearly as much as the other two companies.
It seems that in the oil sector, the valuation of a stock is very dependent on the perceived uncertainty surrounding a company’s future earnings. While I like all three of the companies mentioned here and think that Valero Energy Corporation (NYSE:VLO) actually offers the best risk/reward of the three, you need to use your personal level of risk tolerance to determine which is right for you. Even the “safe” play, Exxon, is anything but boring. In fact, an investment of $100,000 in Exxon Mobil Corporation (NYSE:XOM) 20 years ago would be worth almost $1 million today!
As far as Tesoro Corporation (NYSE:TSO) goes, it seems to be a nice combination of risk and value. During the earnings call, any clarification on where they see the industry heading over the next year or so could provide some degree of clarity to the large range of earnings estimates I mentioned above. For now, any of these three would make an excellent addition to your portfolio.
Matthew Frankel owns shares of ExxonMobil. The Motley Fool has no position in any of the stocks mentioned.
The article This Refiner Seems Cheap, Here’s What to Watch For originally appeared on Fool.com.
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