Vertex Energy(VTNR)

Vertex Energy, Inc.

Stock: VTNR

Rating: Good

Author: Waleed M. Tariq

Summary

  • Vertex Energy bought Shell’s Mobile Refinery.
  • The company’s 2023 estimates and expectations have risen.
  • I advocate buying the stock owing to its 2-year growth possibilities.

Bullish

  • Due to the YoY increase in 2022 and 2023, the long-term investor should buy the company. It’ll gain steam this year.
  • Shell’s Mobile Bay refinery processes 91,000 barrels of oil, LPG, diesel, jet fuel, and gasoline daily. A solo refinery may make basic oils or chemical feedstock. Vertex’s primary refinery produces renewable and conventional products.
  • COVID- 19 and higher material costs lifted 2021 sales to $116 million. 2021 gross margin increased from 2.21 to 3.95 percent ($1 to $4.6 million).

Bearish

  • Besides the normal challenges that face any firm, I rate Vertex purely bullish.

The (Transformational) Mobile Refinery

  • Shell’s Mobile Bay refinery processes 91,000 barrels of oil, LPG, diesel, jet fuel, and gasoline daily. A solo refinery may make basic oils or chemical feedstock.
  • Vertex’s primary refinery produces renewable and conventional products. California’s demand for renewable diesel will double in a decade.

California Annual Diesel Demand Forecast Bar Graph CHart

Valuation

  • Recent share price hikes damaged firm valuation. Forward ratios are much more essential than TTM ratios since the company is turning. Future PS ratio of 0.21 is 87% below industry median of 1.59 and 56% below 5-year average of 0.49.
  • Volatility makes valuation indicators risky for conservative investors. The Mobile refinery won’t start producing until Q1 2023, making the shares expensive in 2022.

Conclusion

  • The success of the Mobile refinery will effect the company’s finances. Analysts are optimistic.
  • High short-interest of 32% could hurt the stock price in the next quarters, although insider ownership of 27.5% should alleviate investor fears. Assess risk before investing.