Targa Resources (NYSE: USAC) and USA Compression Partners (NYSE:USAC) are both oils/energy companies, but which is the better stock? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, earnings, dividends, profitability, risk and institutional ownership.

Dividends

Targa Resources pays an annual dividend of $3.64 per share and has a dividend yield of 6.6%. USA Compression Partners pays an annual dividend of $2.10 per share and has a dividend yield of 12.7%. Targa Resources pays out -846.5% of its earnings in the form of a dividend. USA Compression Partners pays out 1,312.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Institutional & Insider Ownership

92.2% of Targa Resources shares are held by institutional investors. Comparatively, 42.2% of USA Compression Partners shares are held by institutional investors. 1.8% of Targa Resources shares are held 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.

Volatility & Risk

Targa Resources has a beta of 2.09, meaning that its share price is 109% more volatile than the S&P 500. Comparatively, USA Compression Partners has a beta of 1.18, meaning that its share price is 18% more volatile than the S&P 500.

Profitability

This table compares Targa Resources and USA Compression Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Targa Resources 2.24% 1.62% 0.76%
USA Compression Partners -0.72% 2.24% 0.84%

Earnings and Valuation

This table compares Targa Resources and USA Compression Partners’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Targa Resources $8.81 billion 1.42 $54.00 million ($0.43) -128.67
USA Compression Partners $280.22 million 5.32 $11.44 million $0.16 103.56

Targa Resources has higher revenue and earnings than USA Compression Partners. Targa Resources is trading at a lower price-to-earnings ratio than USA Compression Partners, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Targa Resources and USA Compression Partners, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Targa Resources 0 9 9 0 2.50
USA Compression Partners 0 2 4 0 2.67

Targa Resources presently has a consensus target price of $56.50, suggesting a potential upside of 2.11%. USA Compression Partners has a consensus target price of $20.67, suggesting a potential upside of 24.72%. Given USA Compression Partners’ stronger consensus rating and higher possible upside, analysts clearly believe USA Compression Partners is more favorable than Targa Resources.

About Targa Resources

Targa Resources Corp., together with its subsidiary, Targa Resources Partners LP, owns, operates, acquires, and develops a portfolio of midstream energy assets in North America. It operates in two segments, Gathering and Processing, and Logistics and Marketing. The company engages in gathering, compressing, treating, processing, and selling natural gas; storing, fractionating, treating, transporting, and selling natural gas liquids (NGL) and NGL products, including services to liquefied petroleum gas exporters; gathering, storing, terminaling, and selling crude oil; and storing, terminaling, and selling refined petroleum products. It is also involved in the purchase and resale of NGL products; and wholesale of propane, as well as provision of related logistics services to multi-state retailers, independent retailers, and other end-users. In addition, the company offers NGL balancing services; and transportation services to refineries and petrochemical companies in the Gulf Coast area, as well as purchases, markets, and resells natural gas. The company operates approximately 27,000 miles of natural gas pipelines, including 37 owned and operated processing plants; and owns or operates a total of 39 storage wells with a gross storage capacity of approximately 69 million barrels. As of December 31, 2017, it leased and managed approximately 640 railcars; 130 transport tractors; and 18 company-owned pressurized NGL barges. The company was founded in 2005 and is headquartered in Houston, Texas.

About USA Compression Partners

USA Compression Partners, LP provides compression services under term contracts with customers in the natural gas and crude oil industries in the United States. The company engineers, designs, operates, services, and repairs its compression units; and maintains related support inventory and equipment. It also provides compression services in various shale plays, including the Utica, Marcellus, Permian Basin, Delaware Basin, Eagle Ford, Mississippi Lime, Granite Wash, Woodford, Barnett, Haynesville, Niobrara, and Fayetteville shales. As of December 31, 2017, the company had approximately 1,799,781 horsepower in its fleet. It serves oil companies; and independent producers, processors, gatherers, and transporters of natural gas and crude oil. USA Compression GP, LLC operates as the general partner of USA Compression Partners, LP. The company was formerly known as Compression Holdings, LP, and changed its name to USA Compression Partners, LP in June 2011. USA Compression Partners, LP was founded in 1998 and is headquartered in Austin, Texas.

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