Analyzing Western Gas Partners (WES) & Sprague Resources (SRLP)

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

Risk and Volatility

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

Dividends

Western Gas Partners pays an annual dividend of $3.62 per share and has a dividend yield of 8.1%. Sprague Resources pays an annual dividend of $2.49 per share and has a dividend yield of 10.7%. 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 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 has increased its dividend for 9 consecutive years and Sprague Resources has increased its dividend for 2 consecutive years. Sprague Resources is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation & Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Western Gas Partners $1.80 billion 3.79 $591.33 million $1.23 36.42
Sprague Resources $2.39 billion 0.22 $10.16 million $1.79 12.96

Western Gas Partners has higher earnings, but lower revenue 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.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Western Gas Partners and Sprague Resources, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Western Gas Partners 1 3 7 0 2.55
Sprague Resources 0 0 2 0 3.00

Western Gas Partners currently has a consensus target price of $60.20, indicating a potential upside of 34.38%. Sprague Resources has a consensus target price of $33.00, indicating a potential upside of 42.24%. Given Sprague Resources’ stronger consensus rating and higher probable upside, analysts clearly believe Sprague Resources is more favorable than Western Gas Partners.

Institutional & Insider Ownership

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

Profitability

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

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

Summary

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

About Western Gas Partners

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.

About Sprague Resources

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.

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