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

Insider & Institutional Ownership

24.4% of Sprague Resources shares are owned by institutional investors. Comparatively, 64.7% of Midcoast Energy Partners shares are owned by institutional investors. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Dividends

Sprague Resources pays an annual dividend of $2.43 per share and has a dividend yield of 9.1%. Midcoast Energy Partners pays an annual dividend of $1.43 per share and has a dividend yield of 18.0%. Sprague Resources pays out 119.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Midcoast Energy Partners pays out -81.2% of its earnings in the form of a dividend. Sprague Resources has increased its dividend for 2 consecutive years and Midcoast Energy Partners has increased its dividend for 2 consecutive years. Midcoast Energy Partners is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk and Volatility

Sprague Resources has a beta of 1.39, suggesting that its share price is 39% more volatile than the S&P 500. Comparatively, Midcoast Energy Partners has a beta of 2.53, suggesting that its share price is 153% more volatile than the S&P 500.

Analyst Recommendations

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

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sprague Resources 0 0 2 0 3.00
Midcoast Energy Partners 0 1 0 0 2.00

Sprague Resources currently has a consensus price target of $33.00, indicating a potential upside of 23.83%. Midcoast Energy Partners has a consensus price target of $8.00, indicating a potential upside of 0.63%. Given Sprague Resources’ stronger consensus rating and higher possible upside, analysts clearly believe Sprague Resources is more favorable than Midcoast Energy Partners.

Profitability

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

Net Margins Return on Equity Return on Assets
Sprague Resources 1.77% 29.64% 4.95%
Midcoast Energy Partners -5.25% -34.51% -2.64%

Earnings and Valuation

This table compares Sprague Resources and Midcoast Energy Partners’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Sprague Resources $2.62 billion 0.23 $103.36 million $2.03 13.13
Midcoast Energy Partners N/A N/A N/A ($1.76) -4.52

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

Summary

Sprague Resources beats Midcoast Energy Partners on 8 of the 12 factors compared between the two stocks.

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.

About Midcoast Energy Partners

Midcoast Energy Partners, L.P. (MEP) is a limited partnership company that is engaged in the natural gas and natural gas liquids (NGL) midstream business. It operates through two segments: Gathering, Processing and Transportation, and Logistics and Marketing. It also provides marketing services of natural gas and NGLs to wholesale customers. The Company’s gathering, processing and transportation business includes natural gas and NGL gathering and transportation pipeline systems, natural gas processing and treating facilities, condensate stabilizers and an NGL fractionation facility. Its logistics and marketing business provides marketing services of natural gas, NGLs and condensate received from its gathering, processing and transportation business. The Company holds interest in Midcoast Operating, L.P., a Texas limited partnership that owns a network of natural gas and NGL gathering and transportation systems, natural gas processing and treating facilities.

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