Green Plains (NASDAQ: GPRE) and Pacific Ethanol (NASDAQ:PEIX) are both small-cap basic materials companies, but which is the superior business? We will contrast the two companies based on the strength of their valuation, analyst recommendations, risk, profitability, earnings, institutional ownership and dividends.

Analyst Ratings

This is a summary of current ratings and price targets for Green Plains and Pacific Ethanol, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Green Plains 0 0 6 0 3.00
Pacific Ethanol 0 0 4 0 3.00

Green Plains currently has a consensus target price of $25.33, suggesting a potential upside of 50.35%. Pacific Ethanol has a consensus target price of $11.50, suggesting a potential upside of 155.56%. Given Pacific Ethanol’s higher possible upside, analysts clearly believe Pacific Ethanol is more favorable than Green Plains.

Institutional and Insider Ownership

80.4% of Pacific Ethanol shares are held by institutional investors. 6.4% of Green Plains shares are held by company insiders. Comparatively, 3.9% of Pacific Ethanol shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Volatility and Risk

Green Plains has a beta of 1.52, meaning that its share price is 52% more volatile than the S&P 500. Comparatively, Pacific Ethanol has a beta of 2.07, meaning that its share price is 107% more volatile than the S&P 500.

Earnings and Valuation

This table compares Green Plains and Pacific Ethanol’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Green Plains $3.41 billion 0.20 $10.66 million $0.71 23.73
Pacific Ethanol $1.62 billion 0.12 $1.41 million ($0.24) -18.75

Green Plains has higher revenue and earnings than Pacific Ethanol. Pacific Ethanol is trading at a lower price-to-earnings ratio than Green Plains, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Green Plains and Pacific Ethanol’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Green Plains 0.92% -0.88% -0.35%
Pacific Ethanol -0.51% -2.13% -1.23%

Dividends

Green Plains pays an annual dividend of $0.48 per share and has a dividend yield of 2.8%. Pacific Ethanol does not pay a dividend. Green Plains pays out 67.6% of its earnings in the form of a dividend.

Summary

Green Plains beats Pacific Ethanol on 10 of the 14 factors compared between the two stocks.

About Green Plains

Green Plains Inc. is an ethanol producer. The Company owns and operates assets throughout the ethanol value chain, including upstream, with grain handling and storage through its ethanol production facilities, and downstream, with marketing and distribution services. It operates through four segments: Ethanol Production, Agribusiness and Energy Services, Food and Food Ingredients, and Partnership. The ethanol production segment includes production of ethanol, distillers grains and corn oil. The agribusiness and energy services segment includes grain procurement. The food and food ingredients segment includes a cattle feedlot operation. The Company’s master limited partnership, Green Plains Partners LP (the partnership), provides fuel storage and transportation services by owning, operating, developing and acquiring ethanol and fuel storage tanks, terminals, transportation assets and other related assets and businesses.

About Pacific Ethanol

Pacific Ethanol, Inc. (Pacific Ethanol) is a marketer and producer of low-carbon renewable fuels in the Western United States. Pacific Ethanol markets all the ethanol produced by four ethanol production facilities located in California, Idaho and Oregon, or the Pacific Ethanol Plants, all the ethanol produced by three other ethanol producers in the Western United States and ethanol purchased from other third-party suppliers throughout the United States. It also markets ethanol co-products, including wet distiller’s grains and syrup (WDG), for the Pacific Ethanol Plants. Its 83% ownership interest in New PE Holdco LLC, the owner of each of the plant holding companies, that collectively own the Pacific Ethanol Plants. Its ethanol customers are integrated oil companies and gasoline marketers who blend ethanol into gasoline. Effective September 02, 2014, Pacific Ethanol Inc raised its interest to 96% from 91%, by acquiring a 5% interest, in PE Op Co.

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