Head-To-Head Analysis: Western Gas Equity Partners (WGP) versus Valero Energy (VLO)

Western Gas Equity Partners (NYSE: WGP) and Valero Energy (NYSE:VLO) are both mid-cap oils/energy companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, risk, analyst recommendations, valuation, institutional ownership, profitability and earnings.

Risk & Volatility

Western Gas Equity Partners has a beta of 1.5, indicating that its stock price is 50% more volatile than the S&P 500. Comparatively, Valero Energy has a beta of 1.2, indicating that its stock price is 20% more volatile than the S&P 500.

Profitability

This table compares Western Gas Equity Partners and Valero Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Western Gas Equity Partners 16.96% 8.99% 4.69%
Valero Energy 2.33% 9.87% 4.43%

Dividends

Western Gas Equity Partners pays an annual dividend of $2.15 per share and has a dividend yield of 5.3%. Valero Energy pays an annual dividend of $2.80 per share and has a dividend yield of 2.9%. Western Gas Equity Partners pays out 130.3% 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 pays out 60.7% of its earnings in the form of a dividend. Western Gas Equity Partners has increased its dividend for 4 consecutive years and Valero Energy has increased its dividend for 7 consecutive years.

Analyst Recommendations

This is a breakdown of recent ratings for Western Gas Equity Partners and Valero Energy, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Western Gas Equity Partners 0 3 7 0 2.70
Valero Energy 0 10 8 0 2.44

Western Gas Equity Partners presently has a consensus price target of $49.80, suggesting a potential upside of 23.21%. Valero Energy has a consensus price target of $80.93, suggesting a potential downside of 16.79%. Given Western Gas Equity Partners’ stronger consensus rating and higher probable upside, research analysts clearly believe Western Gas Equity Partners is more favorable than Valero Energy.

Institutional and Insider Ownership

18.5% of Western Gas Equity Partners shares are held by institutional investors. Comparatively, 81.3% of Valero Energy shares are held by institutional investors. 0.5% of Valero Energy shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Western Gas Equity Partners and Valero Energy’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Western Gas Equity Partners $1.80 billion 4.90 $345.77 million $1.65 24.50
Valero Energy $75.66 billion 0.56 $2.29 billion $4.61 21.10

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

Summary

Valero Energy beats Western Gas Equity Partners on 9 of the 17 factors compared between the two stocks.

Western Gas Equity Partners Company Profile

Western Gas Equity Partners, LP is a limited partnership. The Company is formed to own approximately three types of partnership interests in Western Gas Partners, LP (WES). WES is an master limited partnership (MLP) engaged in the business of gathering, compressing, treating, processing and transporting natural gas, and gathering, stabilizing and transporting condensate, natural gas liquids (NGLs) and crude oil. WES provides these midstream services for Anadarko Petroleum Corporation (Anadarko), as well as for third-party producers and customers. Its assets and investments are located in the Rocky Mountains (Colorado, Utah and Wyoming), North-central Pennsylvania and Texas. The Bison treating facility treats and compresses gas from coal-bed methane wells in the Powder River Basin of Wyoming. MIGC, LLC receives gas from various coal-bed methane gathering systems in the Powder River Basin and the Hilight system, as well as from WBI Energy Transmission, Inc.

Valero Energy Company Profile

Valero Energy Corporation (Valero) is an independent petroleum refiner and ethanol producer. The Company’s segments include refining, ethanol and Valero Energy Partners LP (VLP). The refining segment includes its refining operations and the associated marketing activities. The ethanol segment includes its ethanol operations and the associated marketing activities, and logistics assets that support its ethanol operations. The Company owns logistics assets (crude oil pipelines, refined petroleum product pipelines, terminals, tanks, marine docks, truck rack bays and other assets) that support its refining operations. Some of these assets are owned by VLP, which is a midstream master limited partnership owned by the Company. VLP’s assets include crude oil and refined petroleum products pipeline and terminal systems in the United States Gulf Coast and the United States Mid-Continent regions. Its refineries produce conventional gasolines, premium gasolines and lubricants, among others.

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