Earthstone Energy (NYSE: ESTE) and Memorial Production Partners (NASDAQ:MEMP) are both small-cap oils/energy companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, valuation, dividends, institutional ownership, earnings, risk and analyst recommendations.

Dividends

Memorial Production Partners pays an annual dividend of $0.06 per share and has a dividend yield of 46.2%. Earthstone Energy does not pay a dividend. Memorial Production Partners pays out -0.9% of its earnings in the form of a dividend.

Valuation and Earnings

This table compares Earthstone Energy and Memorial Production Partners’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Earthstone Energy $42.27 million 12.69 -$54.54 million ($2.13) -3.96
Memorial Production Partners N/A N/A N/A ($6.48) -0.02

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

Profitability

This table compares Earthstone Energy and Memorial Production Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Earthstone Energy -54.69% 4.01% 3.25%
Memorial Production Partners -395.31% -496.55% -58.07%

Institutional and Insider Ownership

12.1% of Earthstone Energy shares are owned by institutional investors. Comparatively, 5.5% of Memorial Production Partners shares are owned by institutional investors. 43.3% of Earthstone Energy shares are owned by company insiders. Comparatively, 1.5% of Memorial Production Partners shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of current recommendations and price targets for Earthstone Energy and Memorial Production Partners, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Earthstone Energy 0 1 8 0 2.89
Memorial Production Partners 0 0 0 0 N/A

Earthstone Energy presently has a consensus target price of $15.56, suggesting a potential upside of 84.31%. Given Earthstone Energy’s higher probable upside, analysts plainly believe Earthstone Energy is more favorable than Memorial Production Partners.

Summary

Earthstone Energy beats Memorial Production Partners on 9 of the 11 factors compared between the two stocks.

Earthstone Energy Company Profile

Earthstone Energy, Inc. is an independent oil and natural gas development and production company. The Company is also engaged in corporate mergers and the acquisition of oil and natural gas properties that have production and future development opportunities. Its operations are all in the upstream segment of the oil and natural gas industry and all its properties are onshore in the United States. The Company’s reserve portfolio primarily consists of assets in the Midland Basin of west Texas, the Eagle Ford trend of south Texas and in the Williston Basin of North Dakota. As of December 31, 2016, the Company held approximately 5,900 net leasehold acres in the Midland Basin, located in Howard, Glasscock, Martin and Midland Counties. As of December 31, 2016, it also has approximately 21,000 net leasehold acres in the Eagle Ford trend of south Texas. In the Williston Basin of North Dakota, it had approximately 5,900 net leasehold acres, as of December 31, 2016.

Memorial Production Partners Company Profile

Memorial Production Partners LP (the Partnership) owns, acquires and exploits oil and natural gas properties in North America. The Partnership is owned by its limited partners and general partner. Its general partner is responsible for managing all of the Partnership’s operations and activities. The Partnership operates in the acquisition, exploitation, development and production of oil and natural gas properties segment. Its business activities are conducted through Memorial Production Operating LLC (OLLC) and its wholly owned subsidiaries. Its assets consist primarily of producing oil and natural gas properties, and are located in East Texas/Louisiana, Rockies, Offshore Southern California, Permian Basin and South Texas. Most of its oil and natural gas properties are located in oil and natural gas reservoirs with geologic characteristics and production profiles and capital requirements.

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