Is Delek US Holdings Stock Overpriced in 2026?

Sometimes, stocks catch lightning in a bottle. Delek US Holdings (NYSE: DK) is a good example. Over the past 12 months, shares of the integrated energy refiner have jumped 122%.

It sure helps when energy stocks and small-cap equities, of which Delek is both, are simultaneously displaying leadership traits. With the stock up 47% year to date but about 12% below its 52-week high, it's in correction territory, raising concerns that the shares are overvalued. Some market observers may argue that the stock is significantly overvalued.

This energy stock may be more undervalued than meets the eye. Image source: Getty Images

Stoking those valuation worries is the point that there's been some recent insider selling at the Tennessee-based energy company. At any company, directors and high-ranking executives sell shares for various reasons. Sometimes it's as simple as diversifying their personal portfolios, but at other times those transactions signal valuation concerns.

However, that's not necessarily the case with Delek. Actually, some signs point to the stock being undervalued. Here's why.

Trapping value, but not a value trap

In the eyes of some investors, Delek's value case centers on its 63.3% interest in Delek Logistics Partners (NYSE: DKL), a midstream crude oil gatherer, processor, and transporter of refined energy products. The logistics business has a market capitalization of $2.8 billion, meaning Delek's stake is worth nearly $1.8 billion, implying the refiner could unlock significant value for shareholders by spinning off or selling or a portion of that interest.

By some estimates, Delek's stake in the logistics business could be worth more than its entire market capitalization, and by taking action on that position, the company could unlock $600 million to $700 million of "trapped" shareholder value.

Inquiring investors will want to know whether it makes sense for Delek to pursue value creation by trimming or parting ways with its economic position in Delek Logistics. The answer is a resounding "yes" because the business has long been undervalued but is growing. Delek Logistics posted a 5.8% increase in first-quarter revenue, and it's generating more earnings and sales from third-party entities, meaning its dependence on Delek is declining.

Investors often covet unencumbered midstream businesses for their predictable, toll-road-like business models. Likewise, refiners freeing themselves of midstream obligations can command capital injections to bolster infrastructure and improve existing operations. There's also plenty of precedent for refiners or integrated oil companies to spin off midstream assets, with a slew of such transactions taking place in the early 2010s.

The point is that the market may not be critical of Delek dumping its logistics investment. Investors may applaud the move.

Delek has other attractive traits

With a market capitalization of $2.6 billion, Delek is just above the strict definition of a small-cap stock, which is capped at $2 billion. Many small caps aren't cheap on valuation because that's the price of admission investors pay for accessing, hopefully, attractive growth prospects.

And there are some things to "nitpick" with Delek. It lacks the scale of Marathon Petroleum and Valero Energy, and its debt-to-equity ratio is higher than theirs. On the bright side, Delek is reducing debt, and it has $624 million in cash.

Bargain hunters can take heart in knowing that, based on price/operating cash flow and enterprise value/revenue, Delek is one of the most discounted names in the energy refining sector.