Approach Resources (NASDAQ: AREX) and Wildhorse Resource Development Corporation (NYSE:WRD) are both small-cap oils/energy companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, earnings, analyst recommendations, valuation, institutional ownership, dividends and risk.

Earnings & Valuation

This table compares Approach Resources and Wildhorse Resource Development Corporation’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Approach Resources $101.58 million 1.95 $49.31 million ($2.64) -0.87
Wildhorse Resource Development Corporation $196.96 million 6.14 $187.09 million N/A N/A

Wildhorse Resource Development Corporation has higher revenue and earnings than Approach Resources.

Profitability

This table compares Approach Resources and Wildhorse Resource Development Corporation’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%
Wildhorse Resource Development Corporation N/A N/A N/A

Insider & Institutional Ownership

24.3% of Approach Resources shares are owned by institutional investors. Comparatively, 94.0% of Wildhorse Resource Development Corporation shares are owned by institutional investors. 5.1% of Approach Resources shares are owned by insiders. Comparatively, 2.6% of Wildhorse Resource Development Corporation shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent recommendations for Approach Resources and Wildhorse Resource Development Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Approach Resources 1 5 2 0 2.13
Wildhorse Resource Development Corporation 0 1 11 1 3.00

Approach Resources currently has a consensus target price of $3.25, indicating a potential upside of 41.30%. Wildhorse Resource Development Corporation has a consensus target price of $19.82, indicating a potential upside of 62.58%. Given Wildhorse Resource Development Corporation’s stronger consensus rating and higher possible upside, analysts plainly believe Wildhorse Resource Development Corporation is more favorable than Approach Resources.

Summary

Wildhorse Resource Development Corporation beats Approach Resources on 11 of the 12 factors compared between the two stocks.

About Approach Resources

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.

About Wildhorse Resource Development Corporation

WildHorse Resource Development Corporation is a holding company. The Company is an independent oil and natural gas company. The Company is focused on the acquisition, exploitation, exploration and development of oil, natural gas and natural gas liquid (NGL) resources in the United States. Its assets are characterized by concentrated acreage positions in Southeast Texas and North Louisiana with multiple producing stratigraphic horizons, or stacked pay zones, and single-well rates of return. In Southeast Texas, it operates in Burleson, Lee and Washington Counties where it primarily targets the Eagle Ford Shale (Eagle Ford Acreage), which is an active shale trends in North America. In North Louisiana, the Company operates in and around the Terryville Complex, where it primarily targets the overpressured Cotton Valley play (North Louisiana Acreage). The Company’s subsidiaries include WildHorse Resources II, LLC (WildHorse) and Esquisto and Acquisition Co.

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