Is Valvoline stock a good buy?
In this article we review Valvoline stock to determine if it’s a good buy, sell, or hold.
Valvoline is a leading worldwide marketer and supplier of premium branded lubricants and automotive services, with sales in more than 140 countries. The company was founded in 1866 and is headquartered in Lexington, KY.
Summary: On Sale
Score: 18/20
MOS: 78%
Share Price: $33
Sticker Price: $151
Valvoline Company History
- In 1866, Dr. John Ellis, the inventor of petroleum lubricant for steam engines, founded Valvoline under the name “Continuous Oil Refining Company”. The name didn’t exactly have a short and sweet ring so he renamed it to “Valvoline” in 1868.
- In 1895, the first-ever car race organized in North America was held in Chicago, IL. The Valvoline lubricated, two-cylinder, one-and-three-quarter horsepower car won first place. From this point forward, Valvoline would cement itself in racing culture. Today, team Valvoline™ races in numerous high-performance series worldwide.
- In the early 1900s, Valvoline was the recommended motor oil for the Ford Model T. This established the Valvoline brand as a household name
- In 1939, Valvoline developed X-18, an all-purpose gear oil. This product reduced mechanic shop product inventory and exceeded manufacturer specifications of that time.
- Between 1942-1945, Valvoline oil was widely used to lubricate allied vehicles throughout World War II.
- In 1950, Ashland Oil Inc. of Kentucky acquired Valvoline, ushering in a new era of innovation.
- In 1954, and with automakers shifting to powerful overhead valve v8 engines, Valvoline developed it’s All-Climate™ Motor Oil – eliminating the need for seasonal oil changes.
- In 1965 Valvoline introduced Valvoline™ Racing Motor Oil to the world. Its superior technology was developed to better protect engines in high-stress situations and met the needs of the “muscle car craze” of the era. Used in multiple forms of racing, Valvoline racing oil became, and remains to this day, the best-selling racing oil of all time.
- Between 1970 and 1989 Valvoline won the Indy 500 (1970), NASCAR Daytona 500 (1972), and gained its first Formula One World Championship (1978). In the 1980s, a string of Valvoline cars competed and placed first in many popular races.
- In 1996, Valvoline led in product innovation with the introduction of Durablend™, its first synthetic blend motor oil. This new product brought the many benefits of synthetic to a broader consumer base and pioneered protection for the smaller, high-RPM engines of the day.
- In the early 2000s, While others were focused on new engines, Valvoline was busy tearing apart older ones to make them run better, as consumers began holding on to their vehicles for longer periods of time. The result was Valvoline’s launch of Maxlife™ High Mileage Motor Oil – the first motor oil specifically engineered with technology that provides increased longevity for cars over 75,000 miles. Over the next 10 years, others would follow Valvoline’s lead, and the category of high mileage oil became an industry staple.
- In 2005, Valvoline centers performed their 100 millionth vehicle service.
- Between 2010 – 2015 Valvoline reported $2 billion in global sales.
- In 2012, Hendrick Motorsports announced a multi-year NASCAR agreement with Valvoline.
- In 2014, a new plant was opened in India, bringing the total of blending and packaging plants worldwide to 60. Product innovations continued with the release of NextGen™, a premium lubricant that also saves energy in production.
- In 2016, Valvoline celebrated its 150th anniversary.
- In 2016, Valvoline filed its IPO.
Valvoline Business Model
Valvoline generates revenue through two channels which are categorized as the product division and services division.
Products: Approximately 60% of the revenue comes from sales of products including motor coil, grease & gear oil, lubricants, automatic transmission oil, antifreeze, and heavy-duty oil. Their international distributor offices are located in North America, South America, Asia, the Caribbean, Europe, Latin America, the Middle East, and Africa.
Services: Approximately 40% of the revenue comes from their 1,500 quick-lube locations throughout the US and Canada.
Valvoline News
This article from investorplace.com lists 7 long-term safe-play stocks. This is a list of boring businesses that should see steady growth over the coming nears. With Valvoline, its 1,500 locations make it the second-largest oil change shop in the US and the third-largest oil change shop in Canada.
This article from marketwatch.com states that Valvoline is conducting a search to appoint one or more new board members with EV (Electric Vehicle) experience. Knowing the EV industry is expected to grow incredibly fast, Valvoline needs to position itself as a leader. Keep in mind, EVs don’t require motor oil but they still use fluids, lubricants, and a special oil used for cooling. This means the Valvoline product line will still be a necessity.
This article from pulse2.com states that Valvoline has established itself s the world’s No. 1 supplier of battery fluids for EV manufacturers. These fluids help extend the vehicle range and efficiency.
This article from prnewswire.com states that Valvoline and Cummins have announced a 5-year renewal of their longstanding partnerships. Cummins is the world’s largest independent manufacturer of engines and related components with operations in over 190 countries and territories. This means Cummins will exclusively use Valvoline oil.
This article from careanddriver.com states that six automakers and 30 countries signed a deal to end the sale of gas and diesel-powered cars worldwide by 2040. These automakers include Ford, GM, Mercedes-Benz, Volvo, Jaguar Land Rover, and Chinese automaker BYD. Although EVs will be hot, gas-powered cars will still be around for the next 20 years.
Valvoline Competitive Comparison
Valvoline (VVV)
Summary: On Sale
Score: 18/20
MOS: 78%
Share Price: $33
Sticker Price: $151
Revenue: $2.9B
Locations: 1,500
Royal Dutch Shell (RDS-A)
Summary: Overpriced
Score: 8/20
MOS: 1%
Share Price: $49
Sticker Price: $50
Revenue: $180B
Locations: 2,000 Jiffy Lube locations (Jiffy Lube is owned by Shell)
Exxon Mobile (XOM)
Summary: Watch
Score: 10/20
MOS: 1%
Share Price: $74
Sticker Price: $75
Revenue: $178B
Locations: 11,868 gas stations
Castrol India (CASTROLIND.NS)
Summary: Watch
Score: 11/20
MOS: 1%
Share Price: ₹120
Sticker Price: ₹121
Revenue: ₹29B
O’Reilly Automotive (ORLY)
Summary: On Sale
Score: 14/20
MOS: 63%
Share Price: $646
Sticker Price: $1,770
Revenue: $11B
Locations: 5,616
4 M’s
MOS (Margin of Safety): With a score of 18/20 and MOS of 78%, the company’s financials are nearly as good as they can get.
Meaning: Although motor oil and gas companies may see a threat due to the increase in production of EVs, the threat isn’t imminent. For the next 20 years, gas-powered cars will still be manufactured and maintained which means oil companies like Valvoline will continue to sell products and services. It’s also important to note that Valvoline has already established itself as the No. 1 supplier of battery fluids for EV manufacturers. Overall, Valvoline’s future of serving both gas-powered and EVs looks promising over the next 10 years.
Moat: There are a few competitors in the market worth paying attention to. Shell and Exxon are two companies that sell oil along with gasoline whereas Valvoline is strictly focused on selling oils and lubricants. O’Reilly Automotive sells oils along with auto parts so it isn’t a direct threat. Castrol has a similar focus like Valvoline, on oils and lubricants but their market share isn’t nearly as large. As long as Valvoline continues to keep its focus on oils and lubricants for gas-powered and EVs, they should continue to grow over the next 10 years.
Management: Sam Mitchell has served as CEO since 2016. Prior to Valvoline, Mitchell worked in brand management at Clorox for 8 years. In 1997 he joined Valvoline as director of marketing for their brand management group. In 1999 he was named VP of marketing. In 2000 he was named VP and GM of Valvoline’s do-it-yourself (DIY) retail business. In 2002 he was named VP of Ashland. In 2011 he was named Senior VP of Ashland. Overall, Mitchell has a strong background in branding and marketing. He has the skills to position Valvoline as a household name which provides strong consumer market penetration. This is critical if Valvoline wants to maintain itself as an oil and lubricant global leader.
Valvoline Financials
Now let’s take a look at the financials. A good value investor should be able to read the income statement, cash flow statement, and balance sheet and within 60 seconds have a pretty good idea of how the business is performing.
Revenue (Found on the Income Statement)
2018: $2.2B
2019: $2.3B
2020: $2.3B
2021: $2.9B
Revenue has increased significantly in 2021.
Net Income (Found on the Income Statement)
2018: $166M
2019: $208M
2020: $317M
2021: $420M
Net Income has increased consistently over the last 4 years.
EPS (Found on the Income Statement)
2018: .84
2019: 1.10
2020: 1.70
2021: 2.30
EPS has consistently increased.
Free Cash Flow (Found on the Cash Flow Statement)
2018: $227M
2019: $217M
2020: $221M
2021: $260M
Free Cash Flow has increased in 2021.
Total Assets (Found on the Balance Sheet)
2018: $1.8B
2019: $2B
2020: $3B
2021: $3.1B
Total Assets have increased consistently over the last 4 years.
Total Liabilities (Found on the Balance Sheet)
2018: $2.2B
2019: $2.3B
2020: $3.1B
2021: $3B
The Total Liabilities have decreased in 2021 which is a good sign.
Total Debt (Found on the Balance Sheet)
2018: $1.3B
2019: $1.3B
2020: $2.1B
2021: $1.9B
The debt has decreased in 2021 which is another good sign.
Total Equity (Found on the Balance Sheet)
2017: -$358M
2018: -$258M
2019: -$76M
2020: $135M
The Total Equity has significantly increased in 2021.
As of early 2022, tech stocks are seeing a massive drop. If it’s hard for you to stomach the pullback, it may be wise to look at boring yet essential companies. In this case, Valvoline fits the mold. When you look at all 4 M’s, the MOS and overall financials are outstanding. With the meaning, we know oils and lubricants will be essential for both gas-powered and EVs over the next 20 years. With the moat, there are a few competitors but Valvoline has established itself as a top player in the oil and lubricant space. With the management, Sam Mitchell’s expertise with branding and marketing is a perfect fit. If Valvoline wants to sustain itself as a market leader, the branding and marketing have to be on point.
If you’re looking to diversify your portfolio with a business that may provide slow and steady growth as well as weather downturns in the market, Valvoline may be worth a look.
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The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.