Reviewing Targa Resources (TRGP) and CVR Energy (CVI)

Targa Resources (NYSE: TRGP) and CVR Energy (NYSE:CVI) are both oils/energy companies, but which is the superior investment? We will compare the two companies based on the strength of their dividends, risk, profitability, earnings, analyst recommendations, institutional ownership and valuation.

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Targa Resources $8.81 billion 1.15 $54.00 million ($0.49) -94.32
CVR Energy $5.99 billion 0.45 $234.40 million $2.71 11.37

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

Dividends

Targa Resources pays an annual dividend of $3.64 per share and has a dividend yield of 7.9%. CVR Energy pays an annual dividend of $2.00 per share and has a dividend yield of 6.5%. Targa Resources pays out -742.8% of its earnings in the form of a dividend. CVR Energy pays out 73.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Targa Resources is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

90.1% of Targa Resources shares are held by institutional investors. 1.9% of Targa Resources shares are held by company insiders. Comparatively, 82.0% of CVR Energy 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.

Analyst Ratings

This is a summary of current ratings and price targets for Targa Resources and CVR Energy, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Targa Resources 0 8 8 1 2.59
CVR Energy 0 0 0 0 N/A

Targa Resources presently has a consensus target price of $54.56, suggesting a potential upside of 18.05%. Given Targa Resources’ higher possible upside, equities research analysts clearly believe Targa Resources is more favorable than CVR Energy.

Volatility and Risk

Targa Resources has a beta of 2.05, indicating that its share price is 105% more volatile than the S&P 500. Comparatively, CVR Energy has a beta of 1.71, indicating that its share price is 71% more volatile than the S&P 500.

Profitability

This table compares Targa Resources and CVR Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Targa Resources 0.27% -1.24% -0.59%
CVR Energy 3.91% 4.55% 1.91%

Summary

Targa Resources beats CVR Energy on 9 of the 15 factors compared between the two stocks.

Targa Resources Company Profile

Targa Resources Corp. is a midstream energy company in North America. It provides midstream services. Its segments include Gathering and Processing, and Logistics and Marketing (Downstream Business). It is engaged in the business of gathering, compressing, treating, processing and selling natural gas; storing, fractionating, treating, transporting and selling natural gas liquids (NGLs) and NGL products, including services to liquefied petroleum gas exporters; gathering, storing and terminalling crude oil, and storing, terminalling and selling refined petroleum products. The Gathering and Processing segment consists of gathering, compressing, dehydrating, treating, conditioning, processing, and marketing natural gas and gathering crude oil. The Logistics and Marketing segment includes all the activities necessary to convert mixed NGLs into NGL products and provides certain services, such as storing, fractionating, terminalling, transporting and marketing of NGLs and NGL products.

CVR Energy Company Profile

CVR Energy, Inc., through its subsidiaries, engages in petroleum refining and nitrogen fertilizer manufacturing activities in the United States. The company operates through, Petroleum and Nitrogen Fertilizer segments. The Petroleum segment refines and markets transportation fuels, such as gasoline, diesel fuel, pet coke, natural gas liquids, slurry, sulfur, gas oil, asphalt, jet fuel, and other products. This segment owns and operates a coking medium-sour crude oil refinery in Coffeyville, Kansas; a crude oil refinery in Wynnewood, Oklahoma; and a crude oil gathering system serving Kansas, Nebraska, Oklahoma, Missouri, Colorado, and Texas. It also owns a proprietary pipeline system that transports crude oil from Caney, Kansas to its refinery; and supplies products through tanker trucks directly to customers located in Coffeyville, Kansas, and Wynnewood, Oklahoma, as well as to customers at throughput terminals on Magellan Midstream Partners, L.P. and NuStar Energy, LP's refined products distribution systems. This segment primarily serves retailers, railroads, farm co-operatives, and other refiners/marketers. The Nitrogen Fertilizer segment operates a nitrogen fertilizer plant in North America that utilizes a pet coke gasification process to produce nitrogen fertilizer products. It markets UAN, an aqueous solution of urea and ammonium nitrate to agricultural customers; and ammonia products to agricultural and industrial customers. CVR Energy, Inc. was founded in 1906 and is based in Sugar Land, Texas.

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