Critical Comparison: Penntex Midstream Partners (PTXP) & Valero Energy Partners (VLP)

Penntex Midstream Partners (NASDAQ: PTXP) and Valero Energy Partners (NYSE:VLP) are both energy companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, profitability, dividends, risk, institutional ownership, earnings and analyst recommendations.

Analyst Ratings

This is a breakdown of current ratings and target prices for Penntex Midstream Partners and Valero Energy Partners, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Penntex Midstream Partners 0 5 0 0 2.00
Valero Energy Partners 0 2 6 0 2.75

Penntex Midstream Partners currently has a consensus price target of $19.40, suggesting a potential downside of 3.00%. Valero Energy Partners has a consensus price target of $53.14, suggesting a potential upside of 27.14%. Given Valero Energy Partners’ stronger consensus rating and higher probable upside, analysts clearly believe Valero Energy Partners is more favorable than Penntex Midstream Partners.

Insider and Institutional Ownership

55.0% of Penntex Midstream Partners shares are owned by institutional investors. Comparatively, 29.2% of Valero Energy Partners shares are owned by institutional investors. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Profitability

This table compares Penntex Midstream Partners and Valero Energy Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Penntex Midstream Partners 34.54% 11.00% 5.81%
Valero Energy Partners 54.43% 184.08% 22.28%

Valuation and Earnings

This table compares Penntex Midstream Partners and Valero Energy Partners’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Penntex Midstream Partners N/A N/A N/A $0.26 76.92
Valero Energy Partners $362.62 million 8.15 $188.83 million $2.83 14.77

Valero Energy Partners has higher revenue and earnings than Penntex Midstream Partners. Valero Energy Partners is trading at a lower price-to-earnings ratio than Penntex Midstream Partners, indicating that it is currently the more affordable of the two stocks.

Dividends

Penntex Midstream Partners pays an annual dividend of $1.18 per share and has a dividend yield of 5.9%. Valero Energy Partners pays an annual dividend of $1.92 per share and has a dividend yield of 4.6%. Penntex Midstream Partners pays out 453.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Valero Energy Partners pays out 67.8% of its earnings in the form of a dividend. Penntex Midstream Partners has increased its dividend for 2 consecutive years. Penntex Midstream Partners is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Valero Energy Partners beats Penntex Midstream Partners on 9 of the 12 factors compared between the two stocks.

Penntex Midstream Partners Company Profile

PennTex Midstream Partners, LP, focuses on owning, operating, acquiring and developing midstream energy infrastructure assets in North America. The Company owns and operates midstream gathering, processing and transportation assets in northern Louisiana. The Company provides natural gas gathering and processing and residue gas and natural gas liquid (NGL) transportation services to producers focused on the Cotton Valley formation in northern Louisiana. The Company’s assets primarily consisted of natural gas gathering pipeline, two 200 million cubic feet per day (MMcf/d) design-capacity cryogenic natural gas processing plants, and residue gas and NGL transportation pipelines, as of December 31, 2016. In addition to providing midstream services to its primary customer with its existing assets, the Company pursues other opportunities for organic development and growth as producers in its region continue to develop their acreage.

Valero Energy Partners Company Profile

Valero Energy Partners LP owns, operates, develops and acquires crude oil and refined petroleum products pipelines, terminals, and other transportation and logistics assets. The Company’s assets include crude oil and refined petroleum products pipelines, terminals, and other logistics assets in the United States Gulf Coast and the United States Mid-Continent regions that are integral to the operations of the ten of Valero Energy Corporation (Valero) refineries. It provides assets and services, such as Port Arthur logistics system, McKee logistics system, Memphis logistics system, Three Rivers logistics system, Ardmore logistics system, Houston logistics system, St. Charles logistics system, Corpus Christi logistics system and Meraux logistics system. Port Arthur logistics system includes its Lucas crude system and its Port Arthur products system. McKee logistics system is a crude oil and refined petroleum products pipeline and terminal system supporting Valero’s McKee Refinery.

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