Analyzing Targa Resources (TRGP) and Pembina Pipeline Corp. (PBA)
Targa Resources (NYSE: TRGP) and Pembina Pipeline Corp. (NYSE:PBA) are both mid-cap oils/energy companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, institutional ownership, profitability, analyst recommendations, risk, dividends and valuation.
Insider and Institutional Ownership
87.6% of Targa Resources shares are owned by institutional investors. Comparatively, 50.2% of Pembina Pipeline Corp. shares are owned by institutional investors. 1.9% of Targa Resources shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.
This is a summary of current ratings for Targa Resources and Pembina Pipeline Corp., as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Pembina Pipeline Corp.||0||0||6||0||3.00|
Targa Resources presently has a consensus target price of $54.41, suggesting a potential upside of 28.51%. Pembina Pipeline Corp. has a consensus target price of $45.00, suggesting a potential upside of 38.67%. Given Pembina Pipeline Corp.’s stronger consensus rating and higher probable upside, analysts plainly believe Pembina Pipeline Corp. is more favorable than Targa Resources.
This table compares Targa Resources and Pembina Pipeline Corp.’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Pembina Pipeline Corp.||12.12%||8.60%||3.85%|
Valuation and Earnings
This table compares Targa Resources and Pembina Pipeline Corp.’s revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Targa Resources||$7.65 billion||1.19||$1.02 billion||($1.98)||-21.38|
|Pembina Pipeline Corp.||$4.01 billion||3.26||$1.06 billion||$0.97||33.45|
Pembina Pipeline Corp. has higher revenue, but lower earnings than Targa Resources. Targa Resources is trading at a lower price-to-earnings ratio than Pembina Pipeline Corp., indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
Targa Resources has a beta of 2.21, meaning that its share price is 121% more volatile than the S&P 500. Comparatively, Pembina Pipeline Corp. has a beta of 0.73, meaning that its share price is 27% less volatile than the S&P 500.
Targa Resources pays an annual dividend of $3.64 per share and has a dividend yield of 8.6%. Pembina Pipeline Corp. pays an annual dividend of $1.63 per share and has a dividend yield of 5.0%. Targa Resources pays out -183.8% of its earnings in the form of a dividend. Pembina Pipeline Corp. pays out 168.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Pembina Pipeline Corp. has raised its dividend for 6 consecutive years. Targa Resources is clearly the better dividend stock, given its higher yield and lower payout ratio.
Pembina Pipeline Corp. beats Targa Resources on 9 of the 17 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.
Pembina Pipeline Corp. Company Profile
Pembina Pipeline Corporation is an energy transportation and service provider. The Company operates through four segments. The Conventional Pipelines segment consists of the tariff-based operations of pipelines and related facilities to deliver crude oil, condensate and natural gas liquids (NGL) in Alberta, British Columbia, Saskatchewan, and North Dakota, United States. The Oil Sands & Heavy Oil segment consists of the Syncrude, Horizon, Nipisi and Mitsue Pipelines, and the Cheecham Lateral. These pipelines and related facilities deliver synthetic crude oil produced from oil sands under long-term cost-of-service arrangements. The Gas Services segment consists of natural gas gathering and processing facilities. The Midstream segment consists of the Company’s interests in extraction and fractionation facilities, terminalling and storage hub services under a mixture of short, medium and long-term contractual arrangements.
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