SandRidge Mississippian Trust II (NYSE: SDR) and Sanchez Energy (NYSE:SN) are both small-cap oils/energy companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, dividends, risk, valuation, profitability and analyst recommendations.

Analyst Recommendations

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This is a summary of recent ratings and recommmendations for SandRidge Mississippian Trust II and Sanchez Energy, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
SandRidge Mississippian Trust II 0 0 0 0 N/A
Sanchez Energy 2 7 2 0 2.00

Sanchez Energy has a consensus target price of $8.17, suggesting a potential upside of 162.59%. Given Sanchez Energy’s higher possible upside, analysts clearly believe Sanchez Energy is more favorable than SandRidge Mississippian Trust II.

Valuation & Earnings

This table compares SandRidge Mississippian Trust II and Sanchez Energy’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
SandRidge Mississippian Trust II $20.41 million 2.34 $16.09 million $0.24 4.00
Sanchez Energy $740.33 million 0.36 $43.19 million ($1.69) -1.84

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

Profitability

This table compares SandRidge Mississippian Trust II and Sanchez Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
SandRidge Mississippian Trust II 74.18% 17.64% 17.64%
Sanchez Energy -6.77% N/A -0.23%

Risk & Volatility

SandRidge Mississippian Trust II has a beta of 1.02, meaning that its stock price is 2% more volatile than the S&P 500. Comparatively, Sanchez Energy has a beta of 1.88, meaning that its stock price is 88% more volatile than the S&P 500.

Insider & Institutional Ownership

1.0% of SandRidge Mississippian Trust II shares are owned by institutional investors. Comparatively, 56.6% of Sanchez Energy shares are owned by institutional investors. 14.7% of Sanchez Energy shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Dividends

SandRidge Mississippian Trust II pays an annual dividend of $0.23 per share and has a dividend yield of 24.0%. Sanchez Energy does not pay a dividend. SandRidge Mississippian Trust II pays out 95.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

Sanchez Energy beats SandRidge Mississippian Trust II on 8 of the 14 factors compared between the two stocks.

SandRidge Mississippian Trust II Company Profile

SandRidge Mississippian Trust II is a statutory trust. The royalty interests conveyed by SandRidge Energy, Inc. (SandRidge) from its interests in certain properties in the Mississippian formation in northern Oklahoma and southern Kansas and held by the Trust are referred to as the Royalty Interests. The Trust holds Royalty Interests in specified oil and natural gas properties. The Royalty Interests entitle the Trust to receive approximately 80% of the proceeds from the sale of oil, natural gas and natural gas liquids (NGLs) production attributable to SandRidge’s net revenue interest in approximately 50 wells producing and over 10 additional wells awaiting (together, the Initial Wells), and over 70% of the proceeds from the sale of oil, natural gas and NGL production attributable to SandRidge’s net revenue interest in approximately 200 horizontal oil and natural gas development wells drilled (the Trust Development Wells) within an area of mutual interest (AMI).

Sanchez Energy Company Profile

Sanchez Energy Corporation is an independent exploration and production company. The Company is focused on the acquisition and development of the United States onshore unconventional oil and natural gas resources. The Company primarily focuses on the Eagle Ford Shale in South Texas. The Company also holds an undeveloped acreage position in the Tuscaloosa Marine Shale (TMS) in Mississippi and Louisiana. As of December 31, 2016, it had assembled approximately 278,000 net leasehold acres in the Eagle Ford Shale. As of December 31, 2016, it had 473 net wells in the Eagle Ford Shale area. In its Catarina area, the Company had approximately 106,000 net acres in Dimmit, LaSalle and Webb Counties, Texas, at December 31, 2016. In its Maverick area, it had approximately 100,000 net acres in Dimmit, Frio, LaSalle, Zavala and McMullen Counties, Texas, at December 31, 2016. In its Javelina area, it had approximately 39,500 net acres in LaSalle and Webb Counties, Texas, at December 31, 2016.

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