Comparing Cimarex Energy (XEC) and RSP Permian (RSPP)

Cimarex Energy (NYSE: XEC) and RSP Permian (NYSE:RSPP) are both mid-cap oils/energy companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, valuation, profitability, institutional ownership, risk and earnings.

Volatility & Risk

Cimarex Energy has a beta of 1.35, suggesting that its share price is 35% more volatile than the S&P 500. Comparatively, RSP Permian has a beta of 2.15, suggesting that its share price is 115% more volatile than the S&P 500.

Dividends

Cimarex Energy pays an annual dividend of $0.32 per share and has a dividend yield of 0.3%. RSP Permian does not pay a dividend. Cimarex Energy pays out 8.5% of its earnings in the form of a dividend.

Profitability

This table compares Cimarex Energy and RSP Permian’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cimarex Energy 20.45% 16.11% 8.04%
RSP Permian 13.69% 2.32% 1.61%

Insider and Institutional Ownership

92.4% of Cimarex Energy shares are owned by institutional investors. Comparatively, 86.3% of RSP Permian shares are owned by institutional investors. 1.7% of Cimarex Energy shares are owned by company insiders. Comparatively, 15.0% of RSP Permian shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings for Cimarex Energy and RSP Permian, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cimarex Energy 1 8 16 0 2.60
RSP Permian 0 1 21 1 3.00

Cimarex Energy presently has a consensus target price of $137.30, indicating a potential upside of 18.25%. RSP Permian has a consensus target price of $47.05, indicating a potential upside of 28.08%. Given RSP Permian’s stronger consensus rating and higher probable upside, analysts clearly believe RSP Permian is more favorable than Cimarex Energy.

Earnings & Valuation

This table compares Cimarex Energy and RSP Permian’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cimarex Energy $1.26 billion 8.80 -$408.80 million $3.76 30.88
RSP Permian $353.86 million 16.46 -$24.85 million $0.60 61.22

RSP Permian has lower revenue, but higher earnings than Cimarex Energy. Cimarex Energy is trading at a lower price-to-earnings ratio than RSP Permian, indicating that it is currently the more affordable of the two stocks.

Summary

RSP Permian beats Cimarex Energy on 10 of the 17 factors compared between the two stocks.

About Cimarex Energy

Cimarex Energy Co. is an independent oil and gas exploration and production company. The Company operates in exploration and production (E&P) segment. Its operations are located in Oklahoma, Texas and New Mexico. Its E&P activities take place primarily in two areas: the Permian Basin and the Mid-Continent region. Its Permian Basin region encompasses west Texas and southeast New Mexico. Its Mid-Continent region consists of Oklahoma and the Texas Panhandle. As of fiscal year ended December 31, 2016 (fiscal 2016), its activities in the Mid-Continent were focused in the Woodford shale and the Meramec horizon, both in Oklahoma. During fiscal 2016, production from the Mid-Continent averaged 457 millions of cubic feet equivalent (MMcfe) per day, or 47% of total company production. All of the Company’s oil and gas assets are located in the United States. As of December 31, 2016, 63% of its total proved reserves were located in the Mid-Continent region and 37% were in the Permian Basin.

About RSP Permian

RSP Permian, Inc. is an independent oil and natural gas company. The Company is engaged in the acquisition, exploration, development and production of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin of West Texas. The Company’s properties are located on contiguous acreage blocks in the Midland Basin, and the Delaware Basin, both sub-basins of the Permian Basin. The Midland Basin properties are primarily in the adjacent counties of Midland, Martin, Andrews, Ector, Glasscock and Dawson. The Delaware Basin properties are in Loving and Winkler counties. The Company has drilled Lower Spraberry horizontal well and a Middle Spraberry horizontal well in the Permian Basin. In addition, it has also drilled a Wolfcamp B horizontal well in the North Midland Basin.

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