Financial Review: Vantage Drilling (VTGDF) versus Archrock (AROC)

Vantage Drilling (OTCMKTS: VTGDF) and Archrock (NYSE:AROC) are both small-cap oils/energy companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, valuation, analyst recommendations, risk, profitability, institutional ownership and earnings.

Dividends

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Archrock pays an annual dividend of $0.48 per share and has a dividend yield of 5.3%. Vantage Drilling does not pay a dividend. Archrock pays out 192.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Insider and Institutional Ownership

0.0% of Vantage Drilling shares are owned by institutional investors. Comparatively, 91.8% of Archrock shares are owned by institutional investors. 7.5% of Vantage Drilling shares are owned by company insiders. Comparatively, 2.5% of Archrock shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of recent recommendations and price targets for Vantage Drilling and Archrock, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Vantage Drilling 0 0 0 0 N/A
Archrock 0 4 4 0 2.50

Archrock has a consensus price target of $13.29, indicating a potential upside of 46.06%. Given Archrock’s higher possible upside, analysts clearly believe Archrock is more favorable than Vantage Drilling.

Profitability

This table compares Vantage Drilling and Archrock’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Vantage Drilling -79.77% -90.30% -13.67%
Archrock 2.39% -2.31% -0.67%

Volatility & Risk

Vantage Drilling has a beta of 2.1, suggesting that its stock price is 110% more volatile than the S&P 500. Comparatively, Archrock has a beta of 2.92, suggesting that its stock price is 192% more volatile than the S&P 500.

Earnings & Valuation

This table compares Vantage Drilling and Archrock’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Vantage Drilling $182.18 million 0.01 -$618.45 million ($30.86) 0.00
Archrock $794.66 million 0.81 $18.95 million $0.25 36.40

Archrock has higher revenue and earnings than Vantage Drilling. Vantage Drilling is trading at a lower price-to-earnings ratio than Archrock, indicating that it is currently the more affordable of the two stocks.

Summary

Archrock beats Vantage Drilling on 13 of the 15 factors compared between the two stocks.

About Vantage Drilling

Vantage Drilling Company is a holding and offshore drilling company focused on operating a fleet of modern and specification drilling units. The Company’s principal business is to contract drilling units, related equipment and work crews, primarily on a dayrate basis to drill oil and natural gas wells for its customers. It also provides construction supervision services for drilling units. Through its fleet of drilling units, it provides offshore contract drilling services. It provides contract drilling services with different types of modern, high-specification MODUs, including jackup rigs and drillships, and in different geographic regions. Its customers are primarily multinational oil and natural gas companies, Government owned oil and natural gas companies and independent oil and natural gas producers. A jackup rig is a mobile, self-elevating drilling platform equipped with legs and Drillships are self-propelled, positioned and suited for drilling in remote locations.

About Archrock

Archrock, Inc. is a natural gas contract operations services company. The Company also provides natural gas compression services to customers in the oil and natural gas industry throughout the United States and supplies aftermarket services to customers that own compression equipment in the United States. The Company operates through two segments: contract operations and aftermarket services. The contract operations segment primarily provides natural gas compression services to meet specific customer requirements. The Company provides contract operations services, including the personnel, equipment, tools, materials and supplies to meet its customers’ natural gas compression needs. The aftermarket services segment provides a range of services to support the compression needs of customers, from parts sales and normal maintenance services to full operation of a customer’s owned assets.

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