California Resources (NYSE: CRC) and Approach Resources (NASDAQ:AREX) are both small-cap oils/energy companies, but which is the superior business? We will compare the two businesses based on the strength of their earnings, dividends, risk, institutional ownership, profitability, analyst recommendations and valuation.

Earnings and Valuation

This table compares California Resources and Approach Resources’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
California Resources $1.55 billion 0.41 $279.00 million ($4.85) -3.07
Approach Resources $90.30 million 2.29 -$52.24 million ($2.52) -0.95

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

Volatility & Risk

California Resources has a beta of 6.32, indicating that its share price is 532% more volatile than the S&P 500. Comparatively, Approach Resources has a beta of 2.67, indicating that its share price is 167% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent recommendations and price targets for California Resources and Approach Resources, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
California Resources 1 1 2 0 2.25
Approach Resources 1 4 1 0 2.00

California Resources presently has a consensus target price of $13.33, suggesting a potential downside of 10.51%. Approach Resources has a consensus target price of $2.80, suggesting a potential upside of 17.15%. Given Approach Resources’ higher possible upside, analysts plainly believe Approach Resources is more favorable than California Resources.

Profitability

This table compares California Resources and Approach Resources’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
California Resources -10.23% N/A -3.96%
Approach Resources -165.95% -6.39% -3.21%

Insider and Institutional Ownership

75.6% of California Resources shares are held by institutional investors. Comparatively, 24.7% of Approach Resources shares are held by institutional investors. 0.9% of California Resources shares are held by insiders. Comparatively, 5.1% of Approach Resources shares are held 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.

Summary

California Resources beats Approach Resources on 8 of the 13 factors compared between the two stocks.

About California Resources

California Resources Corporation is an independent oil and natural gas exploration and production company, with operating properties within the State of California. The Company produced approximately 140 thousand barrels of oil equivalent per day (MBoe/d), as of December 31, 2016. As of December 31, 2016, the Company had net proved reserves of 568 million barrels of oil equivalent (MMBoe). As of December 31, 2016, it drilled 42 development wells with 37 wells in the San Joaquin basin and five in the Los Angeles basin, which included over 30 steamflood and eight waterflood wells. As of December 31, 2016, the Company produced 36 billion barrels of oil equivalent (BBoe), including approximately 20 BBoe in the San Joaquin basin, 11 BBoe in the Los Angeles basin, three BBoe in the Ventura basin and 10 trillion cubic feet (Tcf) of natural gas in the Sacramento basin. Its operations included 135 fields with 8,837 gross active wellbores, as of December 31, 2016.

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.

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