Epsilon Energy (NASDAQ:EPSN) and Dorchester Minerals (NASDAQ:DMLP) Critical Review

Dorchester Minerals (NASDAQ:DMLP) and Epsilon Energy (NASDAQ:EPSN) are both small-cap energy companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, valuation, earnings, analyst recommendations, profitability, risk and dividends.

Profitability

This table compares Dorchester Minerals and Epsilon Energy’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Dorchester Minerals	49.84%	34.73%	33.86%
Epsilon Energy	-3.77%	5.56%	3.26%

Insider and Institutional Ownership

19.2% of Dorchester Minerals shares are owned by institutional investors. Comparatively, 60.3% of Epsilon Energy shares are owned by institutional investors. 5.9% of Dorchester Minerals shares are owned by insiders. Comparatively, 28.4% of Epsilon Energy shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Dorchester Minerals and Epsilon Energy, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Dorchester Minerals	0	1	0	0	2.00
Epsilon Energy	0	1	0	0	2.00

Earnings and Valuation

This table compares Dorchester Minerals and Epsilon Energy”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Dorchester Minerals	$152.83 million	9.23	$55.25 million	$2.07	13.54
Epsilon Energy	$51.59 million	3.10	-$5.80 million	($0.21)	-25.19

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

Dividends

Dorchester Minerals pays an annual dividend of $3.53 per share and has a dividend yield of 12.6%. Epsilon Energy pays an annual dividend of $0.25 per share and has a dividend yield of 4.7%. Dorchester Minerals pays out 170.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Epsilon Energy pays out -119.0% of its earnings in the form of a dividend.

Summary

Dorchester Minerals beats Epsilon Energy on 9 of the 12 factors compared between the two stocks.

About Dorchester Minerals

Dorchester Minerals, L.P. is a publicly traded limited partnership that owns oil and natural gas mineral and royalty interests. The partnership also holds overriding royalty and net profits interests in producing and undeveloped properties. Dorchester generally does not drill or operate wells. Instead, it leases its mineral interests to exploration and production companies, which develop the properties; Dorchester receives royalties and other payments tied to production and applicable agreements.

About Epsilon Energy

Epsilon Energy Ltd. (NASDAQ: EPSN) is an independent energy company engaged in the acquisition, development, exploration and production of oil and natural gas assets in North America. Its operations are focused primarily on unconventional resource plays and related midstream infrastructure. The company’s principal asset base is associated with the Marcellus Shale in northeastern Pennsylvania, where Epsilon holds interests in natural gas wells and gathering systems. These assets provide exposure to natural gas production and infrastructure serving regional energy markets.