Analyzing Frontline (FRO) & Shell Midstream Partners (SHLX)

Frontline (NYSE: FRO) and Shell Midstream Partners (NYSE:SHLX) are both mid-cap energy companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, earnings, institutional ownership, profitability, risk, dividends and analyst recommendations.

Profitability

This table compares Frontline and Shell Midstream Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Frontline 0.29% 1.70% 0.79%
Shell Midstream Partners 85.14% 3,826.80% 27.98%

Insider & Institutional Ownership

13.2% of Frontline shares are owned by institutional investors. Comparatively, 53.3% of Shell Midstream Partners shares are owned by institutional investors. 48.1% of Frontline shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Frontline and Shell Midstream Partners’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Frontline $754.31 million 1.12 $117.01 million $0.15 33.07
Shell Midstream Partners $291.30 million 19.42 $244.90 million $1.26 23.91

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

Dividends

Frontline pays an annual dividend of $0.30 per share and has a dividend yield of 6.0%. Shell Midstream Partners pays an annual dividend of $1.27 per share and has a dividend yield of 4.2%. Frontline pays out 200.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Shell Midstream Partners pays out 100.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Frontline has raised its dividend for 2 consecutive years and Shell Midstream Partners has raised its dividend for 2 consecutive years.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Frontline and Shell Midstream Partners, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Frontline 1 1 1 0 2.00
Shell Midstream Partners 0 3 4 0 2.57

Frontline currently has a consensus target price of $5.67, suggesting a potential upside of 14.25%. Shell Midstream Partners has a consensus target price of $33.86, suggesting a potential upside of 12.37%. Given Frontline’s higher possible upside, equities analysts clearly believe Frontline is more favorable than Shell Midstream Partners.

Volatility & Risk

Frontline has a beta of 1.88, suggesting that its share price is 88% more volatile than the S&P 500. Comparatively, Shell Midstream Partners has a beta of 1.16, suggesting that its share price is 16% more volatile than the S&P 500.

Summary

Shell Midstream Partners beats Frontline on 10 of the 16 factors compared between the two stocks.

About Frontline

Frontline Ltd. is a shipping company. The Company is engaged in the seaborne transportation of crude oil and oil products. Its tankers segment includes crude oil tankers and product tankers. As of December 31, 2016, the Company’s fleet consisted of 28 vessels owned by the Company (seven very large crude carriers (VLCCs), 10 Suezmax tankers and 11 Aframax/LR2 tankers); 13 vessels that are under capital leases (11 VLCCs and two Suezmax tankers); one VLCC that is recorded as an investment in finance lease; four vessels chartered-in for periods of 12 months, including extension options (two VLCCs and two Suezmax tankers); two VLCCs where cost/revenue is split equally with a third party (of which one is chartered-in by it and one by a third party); three medium range product tankers that are chartered-in on short term time charters with a remaining duration of less than two months, and five vessels that are under commercial management (two Suezmax tankers and three Aframax oil tankers).

About Shell Midstream Partners

Shell Midstream Partners, L.P. is a master limited partnership company, which owns, operates, develops and acquires pipelines and other midstream assets. The Company conducts its operations through its subsidiary, Shell Midstream Operating, LLC. Its assets consist of interests in entities that own crude oil and refined products pipelines serving as key infrastructure to transport onshore and offshore crude oil production to Gulf Coast and Midwest refining markets and to deliver refined products from those markets to demand centers. As of December 31, 2016, it owned interests in seven crude oil pipeline systems, three refined products systems, one natural gas gathering pipeline system and a crude tank storage and terminal system. Its pipeline and terminal systems include Zydeco crude oil system, Auger crude oil system, Mars crude oil system, Bengal product system, Poseidon crude oil system, Odyssey crude oil system, Proteus crude oil system and Endymion crude oil system.

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