Sprague Resources (SRLP) vs. Western Gas Partners (WES) Critical Contrast

Sprague Resources (NYSE: SRLP) and Western Gas Partners (NYSE:WES) are both oils/energy companies, but which is the better investment? We will compare the two companies based on the strength of their dividends, risk, institutional ownership, earnings, analyst recommendations, profitability and valuation.

Valuation & Earnings

This table compares Sprague Resources and Western Gas Partners’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Sprague Resources $2.39 billion 0.23 $10.16 million $1.79 13.41
Western Gas Partners $1.80 billion 3.95 $591.33 million $1.23 38.02

Western Gas Partners has lower revenue, but higher earnings than Sprague Resources. Sprague Resources is trading at a lower price-to-earnings ratio than Western Gas Partners, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Sprague Resources and Western Gas Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sprague Resources 1.50% 24.89% 4.21%
Western Gas Partners 26.41% 14.68% 7.24%

Volatility & Risk

Sprague Resources has a beta of 1.33, suggesting that its stock price is 33% more volatile than the S&P 500. Comparatively, Western Gas Partners has a beta of 1.14, suggesting that its stock price is 14% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent recommendations and price targets for Sprague Resources and Western Gas Partners, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sprague Resources 0 0 3 0 3.00
Western Gas Partners 1 3 6 0 2.50

Sprague Resources presently has a consensus price target of $31.67, indicating a potential upside of 31.94%. Western Gas Partners has a consensus price target of $60.20, indicating a potential upside of 28.74%. Given Sprague Resources’ stronger consensus rating and higher possible upside, equities analysts clearly believe Sprague Resources is more favorable than Western Gas Partners.

Institutional and Insider Ownership

22.3% of Sprague Resources shares are held by institutional investors. Comparatively, 61.8% of Western Gas Partners shares are held by institutional investors. 0.0% of Western Gas Partners shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Dividends

Sprague Resources pays an annual dividend of $2.49 per share and has a dividend yield of 10.4%. Western Gas Partners pays an annual dividend of $3.62 per share and has a dividend yield of 7.7%. Sprague Resources pays out 139.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Western Gas Partners pays out 294.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Sprague Resources has raised its dividend for 2 consecutive years and Western Gas Partners has raised its dividend for 9 consecutive years. Sprague Resources is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Western Gas Partners beats Sprague Resources on 9 of the 17 factors compared between the two stocks.

Sprague Resources Company Profile

Sprague Resources LP is engaged in the purchase, storage, distribution and sale of refined products and natural gas, and provides storage and handling services for a range of materials. The Company operates through four segments: refined products, which purchases a range of refined products, such as heating oil, diesel fuel, residual fuel oil, asphalt, kerosene, jet fuel and gasoline from refining companies, trading organizations and producers; natural gas, which purchases natural gas from natural gas producers and trading companies, and sells and distributes natural gas to commercial and industrial customers in the Northeast and Mid-Atlantic United States; materials handling, which offloads, stores and prepares for delivery a range of customer-owned products, including asphalt, clay slurry, coal and heavy equipment, and other operations, which include the purchase and distribution of coal, certain commercial trucking activities and the heating equipment service business.

Western Gas Partners Company Profile

Western Gas Partners, LP is a master limited partnership (MLP) that acquires, owns, develops and operates midstream energy assets. The Company is engaged in the business of gathering, processing, compressing, treating and transporting natural gas, condensate, natural gas liquids (NGLs) and crude oil in the United States. The Company provides midstream services for Anadarko Petroleum Corporation (Anadarko), as well as for third-party producers and customers. The Company’s operations and activities are managed by its general partner, which is indirectly controlled by Anadarko through Western Gas Equity Partners, LP (WGP). As of December 31, 2016, its assets and investments consisted of gathering systems, treating facilities, natural gas processing plants/trains, NGL pipelines, natural gas pipelines and oil pipelines. These assets and investments are located in the Rocky Mountains (Colorado, Utah and Wyoming), North-central Pennsylvania and Texas.

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