Head to Head Survey: SRC Energy (SRCI) vs. Approach Resources (NASDAQ:AREX)

SRC Energy (NASDAQ: SRCI) and Approach Resources (NASDAQ:AREX) are both small-cap energy companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, valuation, risk, dividends, earnings, analyst recommendations and institutional ownership.

Valuation and Earnings

This table compares SRC Energy and Approach Resources’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
SRC Energy $172.33 million 9.53 $122.86 million N/A N/A
Approach Resources $101.58 million 2.07 $49.31 million ($2.64) -0.92

SRC Energy has higher revenue and earnings than Approach Resources.

Profitability

This table compares SRC Energy and Approach Resources’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
SRC Energy 44.12% 9.36% 7.56%
Approach Resources -169.54% -6.84% -3.47%

Insider and Institutional Ownership

24.5% of Approach Resources shares are owned by institutional investors. 7.8% of Approach Resources shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current recommendations for SRC Energy and Approach Resources, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
SRC Energy 0 3 7 0 2.70
Approach Resources 1 2 2 0 2.20

SRC Energy presently has a consensus target price of $12.00, indicating a potential upside of 46.70%. Approach Resources has a consensus target price of $3.25, indicating a potential upside of 33.74%. Given SRC Energy’s stronger consensus rating and higher possible upside, equities analysts clearly believe SRC Energy is more favorable than Approach Resources.

Summary

SRC Energy beats Approach Resources on 9 of the 11 factors compared between the two stocks.

SRC Energy Company Profile

SRC Energy Inc., formerly Synergy Resources Corporation, is an independent oil and natural gas company. The Company is engaged in the acquisition, development and production of crude oil and natural gas in and around the Denver-Julesburg Basin (D-J Basin) of Colorado. The D-J Basin generally extends from the Denver metropolitan area throughout northeast Colorado into Wyoming, Nebraska, and Kansas. The D-J Basin contains hydrocarbon-bearing deposits in various formations, including the Niobrara, Codell, Greenhorn, Shannon, Sussex, J-Sand and D-Sand. The Company’s drilling and completion activities are focused in the Wattenberg Field, an area that covers the western flank of the D-J Basin, predominantly in Weld County, Colorado. The Company is focused on the horizontal development of the Codell and Niobrara formations. As of December 31, 2016, the Company was the operator of 324 gross (288 net) producing wells and participated as non-operators in 307 gross (65 net) producing wells.

Approach Resources Company Profile

Approach Resources Inc. is an independent energy company. The Company is focused on the exploration, development, production and acquisition of unconventional oil and gas reserves in the Midland Basin of the greater Permian Basin in West Texas. The Company’s business segment is the exploration and production of oil, natural gas liquids (NGLs) and natural gas. The Company’s assets cover an area of approximately 126,000 net acres. Its proved reserves are approximately 166.6 million barrels of oil equivalent. The Company’s proved reserves are primarily located in Crockett and Schleicher Counties, Texas. The Company’s Permian Basin acreage is known as the Project Pangea. The Company owns and operates approximately 800 producing oil and gas wells in the Permian Basin. The Company, through a joint venture with EnCana Oil & Gas (USA) Inc., holds interests in the approximately 3,000 gross acre project in Limestone and Robertson Counties, Texas, in the East Texas Cotton Valley trend.

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