EP Energy (NYSE: EPE) and Earthstone Energy (NYSE:ESTE) are both small-cap oils/energy companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, dividends, earnings, valuation, risk, analyst recommendations and institutional ownership.

Earnings & Valuation

This table compares EP Energy and Earthstone Energy’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
EP Energy $767.00 million 0.85 -$27.00 million ($1.06) -2.41
Earthstone Energy $42.27 million 16.90 -$54.54 million ($2.13) -5.28

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

Analyst Recommendations

This is a breakdown of current ratings and target prices for EP Energy and Earthstone Energy, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
EP Energy 7 5 1 0 1.54
Earthstone Energy 0 0 10 0 3.00

EP Energy presently has a consensus price target of $3.60, indicating a potential upside of 41.18%. Earthstone Energy has a consensus price target of $14.70, indicating a potential upside of 30.78%. Given EP Energy’s higher possible upside, equities research analysts clearly believe EP Energy is more favorable than Earthstone Energy.

Insider & Institutional Ownership

68.9% of EP Energy shares are owned by institutional investors. Comparatively, 13.4% of Earthstone Energy shares are owned by institutional investors. 1.3% of EP Energy shares are owned by insiders. Comparatively, 64.5% of Earthstone Energy shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Volatility and Risk

EP Energy has a beta of 4.45, suggesting that its stock price is 345% more volatile than the S&P 500. Comparatively, Earthstone Energy has a beta of 1.38, suggesting that its stock price is 38% more volatile than the S&P 500.

Profitability

This table compares EP Energy and Earthstone Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
EP Energy -25.44% -8.50% -0.97%
Earthstone Energy -54.69% 4.01% 3.25%

Summary

EP Energy beats Earthstone Energy on 7 of the 13 factors compared between the two stocks.

About EP Energy

EP Energy Corporation (EP Energy) is an independent exploration and production company. The Company is engaged in the acquisition and development of unconventional onshore oil and natural gas properties in the United States. The Company operates through a base of producing assets. It is involved in the development of its drilling inventory located in three areas: the Eagle Ford Shale (South Texas), the Wolfcamp Shale (Permian Basin in West Texas) and the Altamont Field in the Uinta Basin (Northeastern Utah). As of December 31, 2016, in its operating areas, the Company had identified 5,156 drilling locations (including 639 drilling locations to which it has attributed proved undeveloped reserves). As of December 31, 2016, the Company had proved reserves of 432.4 million barrels of oil equivalent (MMBoe) and an average net daily production of 87,641 barrel of oil equivalent per day (Boe/d).

About Earthstone Energy

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.

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