Approach Resources (NASDAQ: AREX) and Baytex Energy Corp (NYSE:BTE) are both small-cap oils/energy companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, institutional ownership, valuation, dividends, risk, analyst recommendations and earnings.

Volatility and Risk

Approach Resources has a beta of 2.76, indicating that its share price is 176% more volatile than the S&P 500. Comparatively, Baytex Energy Corp has a beta of 3.3, indicating that its share price is 230% more volatile than the S&P 500.

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Approach Resources $101.58 million 2.14 $49.31 million ($2.64) -0.95
Baytex Energy Corp $614.84 million 1.14 $345.62 million ($1.32) -2.25

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

Analyst Recommendations

This is a summary of current ratings and recommmendations for Approach Resources and Baytex Energy Corp, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Approach Resources 1 4 2 0 2.14
Baytex Energy Corp 1 4 2 0 2.14

Approach Resources presently has a consensus target price of $3.25, suggesting a potential upside of 28.97%. Baytex Energy Corp has a consensus target price of $7.44, suggesting a potential upside of 150.42%. Given Baytex Energy Corp’s higher possible upside, analysts clearly believe Baytex Energy Corp is more favorable than Approach Resources.

Insider and Institutional Ownership

24.3% of Approach Resources shares are owned by institutional investors. Comparatively, 15.8% of Baytex Energy Corp shares are owned by institutional investors. 5.1% of Approach Resources shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Approach Resources and Baytex Energy Corp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Approach Resources -169.54% -6.84% -3.47%
Baytex Energy Corp -38.91% -5.17% -2.21%

Summary

Baytex Energy Corp beats Approach Resources on 8 of the 11 factors compared between the two stocks.

Approach Resources Company Profile

Approach Resources Inc. is an independent energy company. The Company is focused on the exploration, development, production and acquisition of unconventional oil and gas reserves in the Midland Basin of the greater Permian Basin in West Texas. The Company’s business segment is the exploration and production of oil, natural gas liquids (NGLs) and natural gas. The Company’s assets cover an area of approximately 126,000 net acres. Its proved reserves are approximately 166.6 million barrels of oil equivalent. The Company’s proved reserves are primarily located in Crockett and Schleicher Counties, Texas. The Company’s Permian Basin acreage is known as the Project Pangea. The Company owns and operates approximately 800 producing oil and gas wells in the Permian Basin. The Company, through a joint venture with EnCana Oil & Gas (USA) Inc., holds interests in the approximately 3,000 gross acre project in Limestone and Robertson Counties, Texas, in the East Texas Cotton Valley trend.

Baytex Energy Corp Company Profile

Baytex Energy Corp. (Baytex) is engaged in the business of acquiring, developing, exploiting and holding interests in petroleum and natural gas properties and related assets in Canada (Alberta and Saskatchewan) and in the United States (Texas). The Company’s crude oil and natural gas operations are organized into four business units: Lloydminster, Peace River, Conventional and United States. Each business unit has a portfolio of mineral leases, operated and non-operated properties and development prospects. The Company’s subsidiaries include Baytex Energy Ltd. and Baytex Energy USA, Inc. Baytex Energy Ltd. is engaged in the business of oil and natural gas exploration, exploitation, development, acquisition and production in Canada. Baytex Energy USA, Inc. is engaged in the business of oil and natural gas exploration, exploitation, development, acquisition and production in the United States. It holds all of the operating assets in the United States.

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