Analyzing Summit Midstream Partners (SMLP) and Western Gas Partners (WES)

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Summit Midstream Partners (NYSE:SMLP) and Western Gas Partners (NYSE:WES) are both oils/energy companies, but which is the superior stock? We will compare the two companies based on the strength of their valuation, profitability, dividends, analyst recommendations, institutional ownership, earnings and risk.

Profitability

This table compares Summit Midstream Partners and Western Gas Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Summit Midstream Partners 4.33% 7.98% 2.85%
Western Gas Partners 22.80% 12.18% 5.68%

Volatility and Risk

Summit Midstream Partners has a beta of 1.96, suggesting that its share price is 96% more volatile than the S&P 500. Comparatively, Western Gas Partners has a beta of 1.3, suggesting that its share price is 30% more volatile than the S&P 500.

Valuation & Earnings

This table compares Summit Midstream Partners and Western Gas Partners’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Summit Midstream Partners $488.74 million 2.48 $85.68 million $1.64 9.87
Western Gas Partners $2.25 billion 2.82 $567.48 million $1.30 31.96

Western Gas Partners has higher revenue and earnings than Summit Midstream Partners. Summit Midstream Partners is trading at a lower price-to-earnings ratio than Western Gas Partners, indicating that it is currently the more affordable of the two stocks.

Dividends

Summit Midstream Partners pays an annual dividend of $2.30 per share and has a dividend yield of 14.2%. Western Gas Partners pays an annual dividend of $3.80 per share and has a dividend yield of 9.1%. Summit Midstream Partners pays out 140.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Western Gas Partners pays out 292.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Western Gas Partners has raised its dividend for 10 consecutive years. Summit Midstream Partners is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

43.9% of Summit Midstream Partners shares are owned by institutional investors. Comparatively, 59.2% of Western Gas Partners shares are owned by institutional investors. 0.0% of Western Gas Partners shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of current ratings for Summit Midstream Partners and Western Gas Partners, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Summit Midstream Partners 1 4 5 0 2.40
Western Gas Partners 0 7 6 0 2.46

Summit Midstream Partners presently has a consensus price target of $18.50, indicating a potential upside of 14.34%. Western Gas Partners has a consensus price target of $53.31, indicating a potential upside of 28.30%. Given Western Gas Partners’ stronger consensus rating and higher probable upside, analysts plainly believe Western Gas Partners is more favorable than Summit Midstream Partners.

Summary

Western Gas Partners beats Summit Midstream Partners on 13 of the 17 factors compared between the two stocks.

Summit Midstream Partners Company Profile

Summit Midstream Partners, LP focuses on owning, developing, and operating midstream energy infrastructure assets primarily shale formations in the continental United States. The company provides natural gas gathering, treating, and processing services, as well as crude oil and produced water gathering services. It operates in five unconventional resource basins, including the Appalachian Basin, which comprises the Utica and Point Pleasant shale formations in southeastern Ohio, and the Marcellus Shale formation in northern West Virginia; the Williston Basin that consists of the Bakken and Three Forks shale formations in northwestern North Dakota; the Fort Worth Basin, which includes the Barnett Shale formation in north-central Texas; the Piceance Basin that comprises the Mesaverde formation, and the Mancos and Niobrara shale formations in western Colorado and eastern Utah; and the Denver-Julesburg Basin, which includes the Niobrara and Codell shale formations in northeastern Colorado. The company serves natural gas and crude oil producers. Summit Midstream GP, LLC operates as a general partner of the company. Summit Midstream Partners, LP was founded in 2009 and is headquartered in The Woodlands, Texas.

Western Gas Partners Company Profile

Western Gas Partners, LP acquires, develops, owns, and operates midstream energy assets in the Rocky Mountains, North-central Pennsylvania, and Texas. It is involved in gathering, processing, compressing, treating, and transporting natural gas, condensate, natural gas liquids, and crude oil. Western Gas Holdings, LLC serves as the general partner of Western Gas Partners, LP. The company was founded in 2007 and is headquartered in The Woodlands, Texas. Western Gas Partners LP is a subsidiary of Anadarko Petroleum Corporation.

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